Coinbase's Q2 2023 Revenue Exceeds Expectations: Does It Truly Signal the Arrival of a Bull Market？

Market Review

Last week (7/31-8/6), the cryptocurrency market experienced a general decline in total market capitalization, market sentiment index, and overall performance of major cryptocurrencies.

Total market capitalization continued its downward trend, dropping from $1.18 trillion to $1.16 trillion, a decline of approximately 2%, approaching the July low point.

The market sentiment index initially rose but ultimately remained flat, maintaining at a neutral level of 51. Overall, both indicators are currently in a declining trend and are likely to test the lowest points seen in June, which are a market capitalization of $1 trillion and a panic index of 45.

Cryptocurrency Total Market Cap (Yellow) and Fear Greed Index (Blue) trend from January 1, 2023, to August 6, 2023; Source: MacroMicro.

Apart from stablecoins, major cryptocurrencies saw widespread declines last week. OKX (OKB) performed the best with a 5% increase, followed by Binance Coin (BNB) with a 1% gain. Ripple (XRP) and Litecoin (LTC) performed the worst, both declining by 11%.

Bitcoin (BTC) price decreased by 1%, while its market share increased by 0.4% to 48.6%. Ethereum (ETH) price declined by 2%, with its market share remaining relatively unchanged at 19%.

Price fluctuations of major cryptocurrencies from July 31, 2023, to August 6, 2023; Source: MacroMicro.

Coinbase reported Q2 2023 revenue of $707.9 million, surpassing market expectations

On August 3rd, Coinbase, the world's second-largest cryptocurrency exchange (stock code: COIN), announced its Q2 earnings. According to the financial report, Coinbase achieved quarterly revenue of $707.9 million, surpassing market expectations of $633 million by 12%.

Following the earnings announcement, Coinbase's stock price rose from $90 to $92, representing a 2% increase. However, this news did not reverse the down of Coinbase's stock price, which continued to decline and is currently quoted at $87.

Coinbase stock price chart from April 2022 to August 2023; Source: TradingView.

Usually, stock prices reflect investors' expectations of a company's future performance and have a certain degree of forward-looking nature. The disclosure of Coinbase's second-quarter financial report marked the end of positive news. 

Similarly, the future trend of Coinbase's stock price will depend on expectations for its future performance in Q3, Q4, and beyond. If investors have a positive outlook, Coinbase's stock price will be supported and continue to rise; otherwise, it may continue to decline.

From a technical perspective, Coinbase's stock price has been unable to break through the resistance level at $110 and has faced a pullback. Currently, although Coinbase's stock price is in an upward trend, it lacks support, and there is a significant possibility of revisiting $50 this year. Additionally, the cryptocurrency market is still experiencing a bearish phase and is in a bottoming stage, which limits the improvement of Coinbase's fundamentals.

Coinbase stock price trend chart from April 2022 to August 2023; Source: TradingView.

Coinbase's revenue exceeds expectations, indicating the arrival of a bull market in the crypto industry?

Coinbase's second-quarter operating revenue surpassed market expectations, which is an important catalyst for its stock price increase. However, it cannot be solely concluded that this indicates the arrival of a bull market in the crypto industry. Moreover, the data only outperformed investors' expectations and does not necessarily indicate better performance compared to Coinbase's historical financial data—some metrics may even be worse.

Looking at the overall data, Coinbase's total revenue was $707.9 million, lower than the $808.3 million in the same period last year and lower than the $772.5 million in Q1 of this year, showing a declining trend. In terms of specific breakdown, although transaction revenue is Coinbase's main source of income, the data is not very impressive, while subscription and services revenue shows slightly better results.

Specifically, Coinbase's transaction revenue in Q2 2023 was $327.1 million, which is lower than the $655.2 million in the same period last year and lower than the $374.7 million in the previous quarter. Subscription and services revenue amounted to $335.4 million, lower than the previous quarter's $361.7 million but higher than the $14.74 billion in the same period last year.

Revenue for Coinbase Q2 2023; Source: Coinbase.

Coinbase's revenue primarily consists of three parts: transactions, subscription, and services. Among them, transactions are the most crucial part and directly reflect the trading activity in the cryptocurrency market. A bull market stimulates investor trading, thereby generating more transaction fee revenue for Coinbase. 

However, current data suggests that Coinbase's transaction revenue and total revenue have not significantly improved compared to the past. Therefore, it cannot be concluded that the crypto industry has entered a bull market phase based on the current situation.

Bitcoin: Downtrend hits new lows, continues to pull back in search of support at $28,000/25,000

After a week of sideways consolidation, BTC suddenly opened lower and continued its downward trend on August 1st, reaching a low of $28,600, the lowest point since July 2023. Shortly after, the bulls launched an attack to reclaim $30,000, ending with a bullish hammer candlestick pattern, leading investors to believe a rebound was underway.

However, BTC's strength turned out to be a bluff as it opened higher but then declined on August 2nd, exhibiting a bearish engulfing pattern, followed by oscillation around $29,000.

Bitcoin price trend chart from July 2022 to August 2023; Source: TradingView.

In the short term, BTC remains in a downtrend, and any rebound towards $29,400 is expected to encounter resistance and fall back, continuing its downward movement. While there is some support around $28,000, its strength may not be sufficient, and it is highly likely that BTC will test this level and continue to decline further to $25,000.

BTC/USD daily chart; Source: TradingView.