Coinbase Expects $456 Million in Profits For 2018, Up From $380 Million in 2017

  • Coinbase's financial document revealed that it earned $380 million in profits during 2017.
  • The US-based cryptocurrency exchange expects to earn $456 million in profits this year (2018).

Coinbase Volumes.png

San Francisco-based digital asset exchange, Coinbase, is reportedly expecting a revenue of around $1.3 billion for this year. This, according a document Bloomberg recently reviewed.

As CryptoGlobe reported, Coinbase may seek a valuation of about $8 billion - which would make it the “highest valued” startup in the US.

The US-based exchange also recently added Christopher V. Dodds, a veteran chief financial officer at Charles Schwab, to its board of directors.

Daily Trading Volumes Peaked In Late 2017, Early 2018

Notably, Coinbase’s recent valuation estimate is at least five times greater than it was last year (in 2017). Despite the extended crypto bear market, the digital currency trading platform still might have been able to generate a sizable revenue this year from the commissions it charges its users.

In December of 2017 and early 2018, daily crypto trading volume on Coinbase was in the billions of dollars, and peaked at around $3.5 billion in January of 2018. These numbers have now dropped considerably, however, it seems that the exchange’s reserves may have helped it remain afloat even though crypto prices have plummeted.

Coinbase is also known to have made substantial investments in various cryptocurrencies, however, there is no accurate estimate available on the current value of its assets.

$456 Million In Projected Profits

In 2016, when the digital currency market was a small fraction of its present size, Coinbase had reported a revenue of only $17 million, while also recording a loss of about $16 million. In 2017, Coinbase earned a massive profit of approximately $380 million - due to the dramatic increase in cryptocurrency prices last year.

This year, however, the leading crypto exchange is expecting to earn even more as it has projected a profit of about $456 million in 2018. Commenting on Coinbase’s business development, Asiff Hirji, the president and chief operating officer at Coinbase, said: 

The companies interested in investing in us know that this is the next wave of tech innovation. This was an opportunistic round. We didn’t have to go out and raise capital.

Asiff Hirji

Diversifying Business

Although the number of active users on Coinbase has dropped by about 80 percent since the time period between late 2017 and early 2018, the company has still managed to not only remain operational but has also made some key acquisitions.

In order to further expand its crypto trading services, Coinbase acquired Paradex, a decentralized digital asset exchange (DEX), in May of 2018. Due to the increasing number of hacks of large centralized exchanges, many crypto investors might feel more comfortable trading on a DEX - as traders do not have to share their private keys on these platforms.

While Coinbase expects to earn profits in this year’s bear market, Hirji emphasized that the exchange’s business depends heavily on cryptocurrency prices - meaning that if they decline further, then Coinbase’s sales would also drop.

$503 Million In Company Bank Account 

According to the document referenced by Bloomberg, Coinbase had about $503 million in cash in its company bank account. In order to remain competitive, the American firm has launched new products such as the Coinbase Bundle (in late September). As its name implies, Coinbase Bundle allows users to invest in multiple major cryptocurrencies with a single purchase order.

Last week, Coinbase Custody ("an institutional-grade service optimized for storing large amounts of cryptocurrency in a highly secure way") obtained a license to operate as an independent qualified custodian. As covered, Coinbase raised $300 million during its most recent fundraising round.

While discussing the kind of investors Coinbase is looking for during its latest fundraising round, Hijri said:

For this round, we simply weren’t interested in taking investments from firms that didn’t have a constructive view of crypto. This round, and the future of crypto in general, needs to be about more than asset prices.

Asiff Hirji

Maker's MKR Token Has Risen 37% This Month, Outperforming the Crypto Market

  • MakerDAO loan payment system has performed well during extended crypto bear market.
  • This, according to market analyst, Sebastian Sinclair, who pointed out that MKR tokens are up 37% in value so far this month.

Ethereum-based token maker (MKR) has recently started outperforming the larger cryptoasset market - as MKR has recorded a 37% price rise so far this month.

Currently, MKR tokens are trading $534 after rising 3.4% in the last 24-hour period, and the market capitalization of the maker platform stands at $529.3 million - making it the 17 largest in the cryptocurrency space. On February 14, each MKR token was priced at 4.6 ETH, which is notably the token’s highest valuation since October 8, 2018.

At press time, MKR’s value against ETH has corrected back to approximately 4.16 ETH, presumably after some traders sold some of their holdings in order to take profits.

As explained on its official website, MakerDAO is a smart contract platform built on the Ethereum blockchain . The value of DAI, MakerDAO’s native stablecoin, is backed by ETH and it is also “soft-pegged” at a 1:1 ratio with the USD. DAI’s peg has been created via a system of collateralized debt positions (CDP). Functioning as a loan payment system, MakerDAO uses ETH as collateral, which is required for the governance of DAI in Maker’s ecosystem.

2% Of All ETH In Circulation Locked In MakerDAO Loans

So far this month, MKR’s value has appreciated considerably - when compared to its performance in previous months. According to Sebastian Sinclair, a market analyst and IT journalist, MKR’s recent price movements are a sign that the current bear market is “beginning to falter.”

Maker tokens are issued or burned according to DAI’s price movements - in order to maintain its peg. As Sinclair pointed out, the MakerDAO ecosystem has managed to perform relatively well during the prolonged crypto bear market - as 2% of all ETH in circulation is currently locked into MakerDAO loans.

At press time, over 1.97 million ETH have been locked up in Maker’s primary contract - which accounts for approximately 1.87% of over 104.86 million ETH in circulation. This figure is substantially higher than the 1% of ETH locked by Maker in November 2018. As Sinclair has observed, DAI is “overcollateralized” by over 200% (on average). This means that for every DAI that is issued, there is about $2-3 in ETH locked in CDPs. Because of this, when ETH’s value depreciates, more of that digital asset needs to be locked in Maker’s contracts - in order for DAI to remain collateralized.

MakerDAO Offers "Independent" And Competitive Interest Rates

Moreover, MKR tokens are used to cover transaction costs on the Maker platform and they provide investors with voting rights within MakerDAO’s “continuous approval voting system.”

Recently, MakerDAO’s management increased the platform’s stability fee from 0.5% to 1% - so that fluctuations in DAI’s price are reduced. This should (theoretically) help DAI maintain, or keep its peg close to the USD.

Commenting on the usefulness of MakerDAO, with its ability to offer “competitive” interest rates that are independent of the US Federal Reserve’s rates, Tanner Hoban, a former equity researcher and currently involved with ConsenSys, noted (via Twitter):