A Shift in Era: Coinbase Trapped in Old Coordinates

The "crypto-native" label that once gave Coinbase an advantage in the last cycle is now becoming a burden.

Written by: Prathik Desai

Compiled by: Chopper, Foresight News

Last week, I spent two days, totaling several hours, studying the financial reports of two similar yet distinctly different companies. The first was Robinhood, whose business layout inspires confidence as it nearly meets all the needs of traders and investors in the financial markets. The other was Coinbase, and after reviewing its financial report, I find it hard to remain optimistic about its future.

Coinbase's Q2 financial report disclosed two sets of contrasting data, leaving a mixed feeling about the company's development trajectory. Coinbase's global market share in crypto trading reached a historic high of 10.3%, marking the third consecutive quarter of record share. This aligns perfectly with its vision of becoming a "one-stop exchange." However, at the same time, the company has recorded net losses for three consecutive quarters.

This is the typical pattern of financial report presentations: amplifying the impressive data while downplaying unfavorable indicators. Management hopes the market will focus on the aforementioned market share and the fact that 88% of its revenue no longer comes from the highly cyclical Bitcoin spot trading. But a deeper dive reveals that Coinbase has not truly escaped the constraints of market cycles. It still heavily relies on two market-driven variables: the Federal Reserve's monetary policy and the prices of altcoins.

This article will explain why Coinbase's bets on new businesses have not yet been convincing enough; and how its initially targeted core users may no longer fit the evolving landscape of the crypto industry.

Crisis Alert

Coinbase's traditional business of buying and selling cryptocurrencies for ordinary users is experiencing structural decline. Consumer trading revenue has dropped over 30% year-on-year, amounting to approximately $452 million; retail spot trading volume shrank from $41.5 billion to $25.8 billion. The reality behind the record market share of 10.3% is that the overall pie is shrinking, and Coinbase has merely secured a larger slice.

In Q2 2026, the company reported a net loss of $359 million, marking three consecutive quarters of losses. In the same period last year, Coinbase achieved a net profit of $1.4 billion, the second-best quarter in the company's history.

More concerning than the net loss is the next line of data in the financial report. Coinbase attributes most of its net loss to unrealized losses on the market value of held crypto assets. This explanation holds, but the hidden risks remain. The adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) excluding non-cash gains and losses also did not show a healthy trend, standing at $208 million for the quarter.

Coinbase claims this metric has been positive for 14 consecutive quarters. However, what the company did not disclose is that this is also the lowest value for this metric in the past 11 quarters.

Even without considering the fluctuations in the book value of crypto assets, the operating profit, which directly reflects the fundamental business, has been negative for two consecutive quarters. Operating profit fell from $481 million in Q3 2025 to an operating loss of $114 million in Q2 2026. Compared to last year's second quarter, the operational performance has severely deteriorated.

From the above trends, it is evident that the decline in Coinbase's core business revenue is eroding its profits. Part of the reason stems from the cost structure built for a larger business scale. During the market upcycle in 2025, Coinbase expanded its workforce, nearing 5,000 employees. However, after the market cooled in the latter part of last year, the contraction in costs could not keep pace with the decline in revenue. In Q2, operating expenses reached $1.33 billion, exceeding the net revenue of $1.15 billion. Even without accounting for any impairment of crypto assets, the company's operating expenses have already surpassed its operating income.

In May, Coinbase responded by announcing layoffs of about 700 employees, accounting for 14% of its global workforce.

Coinbase stated it is addressing its dependency issue by developing non-cyclical businesses. The company claims that currently over 88% of its revenue is decoupled from Bitcoin spot trading; subscription and services (S&S) now account for nearly 48% of total revenue, reaching a near 11-quarter high. However, breaking down the S&S segment data from the past few quarters, this good news loses some luster. This quarter, S&S segment revenue was $555 million, the second-lowest level in the past eight quarters.

The revenue from the subscription and services segment includes on-chain staking rewards, stablecoin-related income, interest, financing fees, and other miscellaneous income. Among these, stablecoin float income accounts for more than half of the total S&S revenue. This business remains highly influenced by the macro environment, depending on the Federal Reserve's interest rate policy. An ironic phenomenon is that while the platform's USDC holdings reached a historic high of $20 billion this quarter, the revenue from stablecoin business fell from $309 million in the same period last year to $292 million.

With a larger circulation of stablecoins, the earnings have actually decreased.

Last November, I warned that for every 1% rate cut by the Federal Reserve, quarterly stablecoin revenue would decrease by about $70 million. Now, Coinbase is experiencing this situation firsthand.

The second-largest source of income in the S&S segment also exhibits fragile cyclical dependence. Revenue from crypto staking rewards fell from $145 million in Q2 2025 to $83 million in Q2 2026, a decline of over 40%. This income also fluctuates with the prices of the crypto market.

Stablecoin income combined with staking rewards accounts for more than two-thirds of the so-called "diversified non-trading business," still tied to macro rates and altcoin trends. The only truly sustainable product revenue comes from Coinbase One and custody service fees, which only account for one-fifth of the S&S segment.

The revenue structure has indeed changed, but it has not moved towards a reassuring diversification. It has merely shifted from a single reliance on crypto spot trading to simultaneously being tied to the crypto market and the Federal Reserve's short-term disinclination to raise rates.

A Glimmer of Hope

Despite the numerous risk signals, the Q2 financial report still reveals some positive signals.

The first major highlight comes from the prediction market business. In Q2 2026, this business's annualized revenue (ARR) surpassed $100 million, doubling from the previous quarter.

This business brings incremental demand and is expected to continue rising due to industry tailwinds; NBA playoffs, FIFA World Cup, and other sporting events are the main sources of traffic.

In mid-June, Coinbase launched crypto binary options products, allowing users to predict price movements for assets like BTC, ETH, and SOL over different time frames of 15 minutes, hours, days, months, and years. By the end of the quarter, the number of daily traders in this business tripled, and daily revenue quadrupled. The business leverages the existing funding account system of the platform and does not squeeze the traffic of spot trading.

The second highlight is the rapid growth of institutional and infrastructure businesses. Coinbase remains the largest platform for custodial crypto assets globally, continuously holding over 11% of the world's crypto assets by market value; the majority of the underlying crypto assets for Bitcoin ETFs in the U.S. are also held by Coinbase.

The derivatives business market share also reached a new high, maintaining stability in trading volume despite a 12% drop in overall market trading volume. The acquisition of Deribit has opened up the global options market for this publicly traded exchange, a unique advantage not shared by its peers.

Currently, institutions are increasingly viewing cryptocurrencies as backend infrastructure rather than mere speculative tools, which I believe is the advantage Coinbase should leverage going forward.

However, these promising segments also harbor hidden concerns.

While the prediction market is thriving, Coinbase is essentially just a distribution channel, selling event contracts from Kalshi, with revenue needing to be shared with Kalshi. In contrast, Robinhood possesses its own prediction market exchange license, allowing it to continuously issue various event contracts independently. Coinbase lacks the qualifications to build its own exchange, and its business trading volume and revenue ceiling are largely constrained by the new contracts launched by Kalshi.

Even the two major layouts that Coinbase has high hopes for are still in very early stages.

The x402 payment protocol aimed at AI financial agents has just recorded a historical high in monthly inter-agent transaction volume. In July, the monthly transaction volume of x402 set a new record.

But as Coinbase's CFO Aleia Haas herself admitted, relying on the x402 protocol for commercial monetization is still "in a very early stage." The protocol has processed over 100 million transactions, almost entirely based on USDC, and currently does not generate any fees.

It can drive USDC demand and bring indirect revenue from cross-selling other products, but the company has not provided a clear commercialization timeline.

A Rocky Road Ahead

Stepping back from various financial metrics, it is clear that the crypto industry Coinbase initially aimed to conquer has undergone significant changes, exposing structural challenges that the company urgently needs to address.

When Coinbase was founded, the industry envisioned crypto as an independent parallel financial universe with its own native user base. I still remember Base launching the Onchain Summer event, gathering artists and developers to co-build the on-chain ecosystem. But now, this narrative is being abandoned by the entire financial world. Traditional financial giants and emerging fintech companies are more inclined to treat cryptocurrencies as underlying backend infrastructure, such as stablecoin transfers and blockchain minute-level settlements, to serve traditional financial products that have existed for decades or even centuries.

In this new world, an extremely "crypto-native" identity may instead become a burden. The truly advantageous companies are those that hold a vast number of ordinary C-end users, embedding crypto capabilities in the background so that users can use them without even realizing it.

Robinhood is a typical example, holding nearly 30 million funded accounts. This distribution advantage allows the company to funnel the same batch of paying users into its dozen or so businesses, increasing revenue per user. However, the "crypto-native label" that once granted Coinbase an advantage in the last cycle is now becoming a burden.

The path forward for Coinbase lies in institutional business. This is a territory it can defend and rapidly scale. The vision of a "one-stop exchange" sounds appealing, capable of listing various financial products, but it must ensure that each business has sufficient profit margins to support the overall health of the enterprise.