Everyone wants to fund the next Coinbase – TechCrunch

To celebrate Coinbase earnings report today, investors poured a mountain of money into one of the company’s global competitors.

Just kidding, sure, but today is truly Coinbase earnings day, and private investors have really just invested $ 210 million in another exchange.

The FalconX company is now worth $ 3.75 billion. As Bloomberg notes, this is a 5-fold valuation jump in less than six months. FalconX raised a smaller $ 50 million round in March, including in part from Coinbase Ventures.

The FalconX news should come as no surprise. Indian crypto exchange CoinDCX has just raised $ 90 million, reaching a valuation of $ 1 billion in the process. Last weekend, the Indonesian cryptocurrency exchange Pintu raised $ 35 million. And earlier this year, the Hong Kong-based crypto exchange FTX raised $ 900 million for a valuation of $ 18 billion. There are other examples.

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That’s a lot of capital in a global race to fund the next Coinbase, I think.

And you can’t blame the investors for their hunt. After all, Coinbase has proven to be an incredibly powerful business when interest in crypto is high; U.S. crypto exchange trading revenue reached $ 1.80 billion in the first quarter of 2021, according to its latest 10-Q filing. Coinbase managed to increase its revenue to a net profit of $ 771.5 million. In terms of share, Coinbase earned $ 3.05 per diluted share.

It was an impressive result. Today, investors expect Coinbase to bring in $ 1.77 billion to $ 1.83 billion in revenue, depending on your favorite analyst summary, and earnings per share of around $ 2, $ 57. Considering the company’s first quarter results, you can easily determine what kind of net income this EPS figure represents.

I would normally say that Coinbase’s results today would help set the tone for private sector venture capital investments and valuations of other crypto exchanges. But given the amount of money that has recently poured into a coterie of startups around the world hoping to build the Coinbase for their market, the concept seems somewhat questionable.

Instead, Coinbase’s revenue and market feedback will simply help us understand the playing field in which other crypto exchanges are currently playing, albeit from a decidedly US-centric point of view. Coinbase’s last quarter saw it generate around 81% of its revenue in its home market, as a data point.

But that doesn’t mean that there is no fun to be had. We can do some calculations regarding trading volumes and valuations. Since we have the trading volume data from Coinbase, we can analyze other exchanges for their own shared data and see which looks expensive – or cheap. So let’s just do that. In the numbers!

The volume of transactions as a proxy for income

According to its 10-Q file for the quarter ended March 31, 2021, Coinbase reported that it had a transaction volume of $ 334.74 billion, up 1.022% from its first quarter 2020 figure of $ 29.83 billion. The company also said revenue from its transaction – trading – for the period was $ 1.54 billion. Thus, Coinbase generated around $ 0.0046 per dollar of crypto traded on its platform during the period.

It goes without saying, but we are wandering around in the realm of speculative mathematics, which means that everything we do today is directional rather than absolute. Our goal of seeing how other exchanges are valued based on their trading volumes will be helpful, but not definitive. We will have to wait for more S-1 and similar deposits to get full confidence.