The main topic is Coinbase's second quarter earnings report. The key points are:
- Coinbase generated total revenues of $707.9 million in Q2, beating market estimates.
- The company had a net loss of $97 million but generated a positive adjusted EBITDA of $194 million.
- Analysts had mixed expectations prior to the earnings report.
- Coinbase's quarterly recurring operating expenses have dropped nearly 50% year-over-year.
- After the earnings report, Coinbase's stock rose 7% in after-hours trading but retracted 2% at the time of publication.
- Coinbase's stock is up about 170% year-to-date.
- As of March 31, 2023, Coinbase had $145 billion in quarterly volume traded and $130 billion in assets on its platform.
Cryptocurrency exchange Coinbase is acquiring a minority stake in Circle Internet Financial, dissolving their partnership and bringing the stablecoin USD Coin fully in-house, while also adding native support for USDC on six additional blockchains, bringing the total to 15.
Coinbase may be misrepresenting itself as an exchange and could be violating state money transmitter licenses, according to allegations made by ChainArgos' CEO and General Counsel. The company argues that Coinbase is legally an over-the-counter (OTC) broker rather than an exchange operator, and it may be in violation of its licenses with its Ethereum platform, Base.
The cryptocurrency market has experienced a notable downturn, with the total market capitalization falling by 10% and triggering significant liquidations on futures contracts, attributed to factors such as rising interest rates, inflation, delays in approving a Bitcoin exchange-traded fund (ETF), financial difficulties within the Digital Currency Group (DCG), regulatory tightening, and a strengthening US dollar.
Summary: USD Coin (USDC) will be supported on six additional blockchains, including Cosmos, NEAR, Optimism, Polkadot, and Polygon PoS, as Circle aims to boost adoption for the stablecoin and differentiate it from its competitors.
Coinbase is in talks with major Canadian banks to gain support for the crypto industry in Canada as it faces regulatory uncertainty in its home country, aiming to have the banks participate in the crypto economy in the near future.
In August, the USD strengthened against major currencies, with the dollar index up 2.28%, EURUSD down 1.83%, USDJPY up 2.83%, GBPUSD down 1.96%, USDCAD up 3.25%, and AUDUSD down 4.64%. Meanwhile, major global stock indices experienced declines, led by Hong Kong's Hang Seng index and China's Shanghai composite index.
Coinbase plans to list PayPal's stablecoin, PYUSD, signaling the convergence of traditional finance and the crypto economy and potentially challenging Tether's dominance in the stablecoin market.
Summary: Coinbase and Circle have dissolved the Centre Consortium due to regulatory clarity issues surrounding stablecoins, with Coinbase taking an equity stake in Circle and Circle assuming enhanced responsibilities for the USD Coin (USDC) stablecoin; Binance.US partners with MoonPay to use Tether (USDT) as its new "base asset" for transactions, while Binance faces challenges with fiat withdrawals in Europe; Shopify now accepts USDC payments on its platform, and Solana Pay plans to add additional altcoins; China launches a blockchain-powered data exchange with over 300 participating enterprises.
Bitcoin (BTC) remained relatively unchanged this week with a price of around $26,000, while the crypto market saw developments such as increased Bitcoin mining difficulty, negative reports on Binance, and the integration of USD Coin (USDC) on multiple blockchains. Additionally, there were updates on regulations, legal matters, crimes, and NFTs.
Tether (USDT) is the world's largest stablecoin with over $66 billion in market capitalization, despite controversies surrounding its collateral and reserve holdings.
Circle will soon launch a native version of its USD Coin (USDC) on the Base network, eliminating the need for the bridged version currently used by users.
Bitcoin's price dropped below $26,000 as the approval of a Bitcoin ETF was further delayed by the SEC, reversing the bullish gains from the Grayscale court decision earlier in the week. The crypto market also experienced a decline, with Ethereum's price going down by 3.5% and the overall market cap losing $11.2 billion. However, Maker and Toncoin managed to resist the bearish trend with positive gains. The global macroeconomic landscape also added to the uncertainty, as key economic data raised doubts about a potential interest rate hike.
Ethereum staking services have agreed to limit all validators to 22% in order to ensure the decentralization of the Ethereum network, while DeFi hacks and exploits resulted in a loss of $16 million in August, including a nearly $900,000 exploit on Balancer protocol, and Shibarium's second launch saw over 100,000 new wallets added to the layer-2 protocol. Additionally, the USDC stablecoin is set to launch on Coinbase's layer-2 platform, and the DeFi market experienced a bearish decline in response to a delay in the approval of a Bitcoin spot ETF.
Stablecoin issuer Tether has become one of the top buyers of US Treasury bills, with an exposure of $72.5 billion, ranking above several countries, according to Tether's CTO Paolo Ardoino. This highlights the relevance of USDT in emerging markets as a protection against inflation.
Circle, the company behind the stablecoin USDC, faced a crisis when $3.3 billion of its reserves were stuck at Silicon Valley Bank, causing USDC to lose its $1 peg and lose market share to rival stablecoin Tether, revealing the challenges and shortcomings of Circle's ambitions to reshape the financial system with its dollar-backed token.
Major cryptocurrencies declined as investors awaited regulatory developments, including the SEC's ruling on a Bitcoin ETF, while Coinbase revealed plans for international expansion and focus on obtaining licenses in key financial jurisdictions.
The amount of stablecoin USDT on crypto exchanges is increasing, which is seen as a positive sign, while the supply of Bitcoin and Ethereum on exchanges is decreasing, indicating strong holding sentiment and potential future buying interest.
Coinbase's layer 2 blockchain Base has achieved a record-high number of daily transactions driven by the decentralized social network platform Friend.tech, while the sale of tokens held by bankrupt exchange FTX will not cause a market shock due to controlled liquidations, according to Coinbase.
Coin Metrics' latest report shows that Coinbase's revenues have diversified away from trading fees, now accounting for 77% of total revenues, as other business lines like subscription fees and wallet services contribute an increasing share. However, Coinbase's growth is limited due to its high trading fees and dependence on the U.S. market, making its future uncertain.
