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Here’s what you’ll find in today’s edition:

• What Coinbase’s Q1 results and pending Deribit buy say about its future.

• Another Fed week has come and gone. Here’s what else happened.

Updating Coinbase’s outlook

Coinbase had an eventful Thursday — revealing its intent to buy crypto options giant Deribit before detailing its Q1 earnings after the market closed. 

As the dust settled, analysts gave a mixed bag of outlooks for the company.

The crypto exchange’s total first quarter revenue was $2 billion — down 10% from the prior quarter. While trading revenue was down 19% quarter over quarter (nearly $1.3 billion), subscription and services revenue rose 9% over that span (to ~$700 million).

That subscription and services figure includes stablecoin revenue derived from its arrangement with Circle (Coinbase earns reserve income on the USDC it holds).

USDC’s market cap reached a high around $60 billion in Q1, and average USDC held in Coinbase products grew 49% QoQ to $12.3 billion.

Speaking of stablecoins, the Senate’s cloture vote yesterday on the GENIUS Act failed, 48-49. Coinbase CEO Brian Armstrong said he wasn’t discouraged.

“It’s all part of the negotiation,” he noted on yesterday’s earnings call. “We think there’ll be another vote next week on stablecoins so we’re very excited about that progress.”

Deribit deal, more M&A?

Analysts of course asked about the pending $2.9 billion deal to acquire Deribit revealed earlier in the day.

Benchmark analyst Mark Palmer said yesterday the purchase would give Coinbase “an immediate and dominant foothold in the high-growth derivatives space” as more institutions adopt crypto. Architect Partners’ Michael Klena told me he expects competitors to respond via their own acquisitions.    

In terms of financial impact, Coinbase CFO Alesia Haas said: “Deribit has a history of positive adjusted EBITDA, and we believe it will be adjusted EBITDA positive on an accretion basis.”

Oppenheimer & Co. analyst Owen Lau said he believes this deal will make COIN a “legitimate challenger” to Binance, Bybit and OKX when it comes to derivatives. 

“Importantly, crypto options are less cyclical with steady demand during both up and down markets,” Lau explained.

But Compass Point analysts Ed Engel and Joe Flynn pointed out Deribit’s focus on institutional customers. That doesn’t help Coinbase grow its retail-driven perpetuals trading volumes, which they called “a necessary precursor to growing market share.”

When asked about whether the crypto exchange would remain active on the M&A front, Coinbase president Emilie Choi noted the cash on its balance sheet ($8.5 billion, by Lau’s count) means it can make “bigger bets.”

Choi added: “We also think regulatory clarity is going to enable us to take larger swings with greater confidence, unlocking new products, utility cases and geographies.”

Mixed outlook

Despite general optimism around the Coinbase-Deribit deal, Morningstar analyst Michael Miller told me he doesn’t think the acquisition drastically changes his overall view of, or outlook for, the exchange (his fair value estimate for COIN is $170).

After all, he said, it’s an extension of existing efforts and doesn’t reduce Coinbase’s crypto market exposure, which contributes volatility to quarterly results.

Though Coinbase has had “considerable success” in growing stablecoin revenue, Miller noted, execs expect that to be more than offset in Q2 by a decline in blockchain rewards revenue. The company projects its Q2 subscription and services revenue to fall to somewhere between $600 million and $680 million. 

Coinbase’s $240 million of total transaction revenue in April puts it on pace to end Q2 at $720 million. That would be down 34% from Q1. 

Engel and Flynn downgraded COIN to a sell rating last week — reiterating in a note yesterday that COIN's addressable market for retail trading is already deeply penetrated in the US.

“We believe institutional segments represent a larger growth opportunity; however, these are both lower margin and more competitive businesses than COIN's legacy retail footprint,” they explained.

The Compass Point analysts’ stock price target for COIN is $180. The company’s shares were trading for ~$202 at 2 pm ET — down 2% on the day. 

Lau is more bullish, giving COIN a 12- to 18-month price target of $269. He lowered that from $279 though, noting tariff-fueled macro uncertainty’s effect on volumes.

We’ll see how legislative updates and trade war developments impact COIN going forward. 

— Ben Strack

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📅 June 24–26 | Brooklyn, NY

Happy Friday! Investors had a lot to consider this week with the White House’s tariff updates and the Fed’s interest rate decision. Plus, earnings season rages on. Markets are poised to end the week relatively flat, while Treasury yields remain somewhat volatile. 

Here’s a recap: 

• The US trade deficit hit a record-high $140.5 billion in March, data released Tuesday showed. That was up 14% from February as imports increased 4.4% month over month. The figures are surprising given businesses have been rushing to ramp up inventories ahead of higher levies taking effect. 

• The FOMC on Wednesday, as expected, held interest rates steady. Fed Chair Jerome Powell told reporters he will not consider any preemptive rate cuts to get ahead of tariff impacts. Powell reiterated the committee would continue watching the data but warned that the risk of rising unemployment and persistent inflation have increased recently.

• On the tariff front, President Trump yesterday announced a trade deal with the UK, marking the first such agreement since early-April’s “Liberation Day.” He was light on details — noting they’re “being written up in the coming weeks” — but said US companies will have improved access to goods like beef and machinery. The 10% flat rate on most imports from the UK will remain. Markets initially ticked higher on the news, but by midway through Thursday’s session they had mostly erased gains.

— Casey Wagner