Bad Tape + Weak Print: When Does COIN Bottom?---

In Beijing’s early hours on Feb 13 after the U.S. close, $Coinbase(COIN.US) released its Q4 2025 results. The quarter disappointed, missing market expectations. That said, the stock has largely decoupled from the print, as COIN has sold off further with crypto since Feb while most analyst models were set in Jan.

Stepping back from the consensus, the company is in an investment-led expansion phase. It is pushing into stock trading, perpetual equity contracts and prediction markets via M&A and in-house builds, driving a clear step-up in expenses, which compounds short-term profit pressure in a weak market.

Specifically:

1. Trading cooled fast: Transaction revenue fell 6% QoQ, below the Street. Versus last year’s peak, it dropped 37% YoY.

Crypto slumped after peaking in Oct amid liquidity swings. Per CoinGecko, total crypto market cap fell 24% QoQ to $3tn, with spot volumes down 7% QoQ.

On Coinbase, trading volumes still lagged the industry, down 8% QoQ, though the gap narrowed, likely helped by Deribit integration, prediction-market initiatives and stock tokens. Monthly transacting users fell by ~0.2mn QoQ, and platform assets shrank 27%.

2. Subscriptions can’t stay immune in high volatility: Given the cyclicality in trading, we look to staking, custody and stablecoins within subscription revenue as a better gauge of Coinbase’s underlying execution. These lines should be less tied to short-term trading.

The issue is that subscriptions also move with industry sentiment when swings are severe. In volatile periods, they often drift with the cycle.

(1) Staking rewards, ~10% of total revenue and 21% of subscriptions, are tightly linked to ETH and SOL prices. With those assets down 30–40% QoQ in Q4, staking rewards fell 18% QoQ.

(2) Stablecoin interest-sharing, ~20% of revenue, is almost fully observable and landed in line with expectations. However, USDC issuance growth was slow, up only 8% QoQ in Q4, further decelerating vs prior quarters.

While use cases are expanding, most USDC activity still supports crypto trading. The weak market therefore dragged on USDC demand.

In Q4, USDC circulating on Coinbase’s platform accounted for roughly 23% of the market, marking a further share gain.

(3) The remaining ~10% ‘Other’ includes institutional custody, Coinbase One and Base. Custody fees likely stayed cyclically sensitive, but Base revenue continued to expand and stood out as one of the few bright spots.

3. Near-term earnings ‘caved in’: Coinbase’s costs are relatively rigid across trading-related fees, headcount and baseline opex, and trading margins are high by segment. When trading slows, margins mechanically compress.

At the same time, Coinbase continued to invest for expansion, entering stock trading, perpetual equity contracts and prediction markets via M&A and self-developed products. Opex rose 14% QoQ across major lines.

This amplified the profit hit in a weak tape, with Q4 EBITDA down 30% QoQ and 56% YoY from last year’s peak period. Profitability deteriorated across metrics.

Management guided Q1 operating expenses to be flat QoQ, suggesting investment won’t be materially cut despite the downturn.

4. Key metrics at a glance

(In the table, ‘4Q25e’ reflects sell-side expectations as of the day before the release.)

Dolphin Research View

Coinbase is clearly in its darkest hour, yet management remains confident. They acknowledge crypto’s cyclicality but see a large mid-to-long-term opportunity and are backing that view with continued investment despite a cold market, while signaling that 2026 will be more controlled vs 2025, a special ‘investment year’.

Given COIN trades largely with crypto beta, the ‘wide miss’ vs expectations in Q4 has limited standalone significance. The stock is more tethered to broader market conditions.

Still, the company’s refusal to ease up on investment reveals rising competitive intensity and ecosystem clashes, including higher acquisition-driven expenses, richer USDC incentives, and a higher self-held USDC balance to defend or lift its ecosystem position. These moves underscore a race for share.

Viewed charitably, these are investments to build long-term moat. But in the near term, escalating competition is rarely what most capital wants to see.

On top of that, near-term liquidity dynamics (Kevin Warsh’s rate cuts alongside balance-sheet run-off) and the CLARITY bill’s path (SEC/CFTC remit and whether stablecoins can offer user incentives) may keep crypto choppy for a while. The market may need more time to stabilize.

In the meantime, pinning down COIN’s downside support could matter more for short-term trading.

1) Since near-term share price is tied to crypto, start with BTC’s move. At ~$67k, BTC trades below marginal production costs of $77–87k, implying upstream supply should slow as cost pressure bites. That could offer some near-term support.

2) How to gauge a bottom off fundamentals? In our prior deep dive, Dolphin Research assigned a bearish $13.5bn valuation, then assuming stablecoin market cap of $69bn. With stablecoins now at $76bn, we reset our bearish 2026 case as follows:

(1) Assume Q4’s muted run-rate persists, with trading revenue annualizing at $4bn. This embeds continued weak volumes.

(2) Stablecoin market cap grows from $76bn to $90bn, with Coinbase’s share easing to 20%. At a blended reserve yield of 3.7%, annual stablecoin revenue would be ~$1.7bn.

(3) Staking revenue annualizes at $600mn off Q4. Assumptions reflect depressed token prices.

(4) Base, institutional custody and other lines grow 2–3% QoQ, annualizing at $650mn. This implies modest sequential expansion.

Total net revenue would be ~$7.0bn, plus ~$300mn of interest income, for ~$7.3bn in total. Applying a slightly better-than-Q4 EBITDA margin of 35% (still on the conservative side historically) and a traditional financials EV/EBITDA of 10–15x yields a conservative valuation of $26–38bn.

At today’s ~$38.5bn market cap, COIN is stepping into our conservative band, suggesting the downside could start to firm up. To mitigate timing risk, investors could wait for a more comfortable entry closer to the lower end of that range.

Detailed analysis below

I. Core biz. overview

Coinbase has evolved from an exchange into a platform building an on-chain integrated financial stack around digital assets. Its key advantage vs peers is regulatory friendliness, which could be decisive as regulators increasingly recognize and shape the market.

By revenue buckets, there are three main sources: trading, subscriptions and other. These collectively drive the P&L across cycles.

Trading is highly cyclical yet still contributes 50%+. Subscriptions and ‘other’ (custody/settlement, staking, stablecoins, data/cloud and investment income) act as a buffer, as their steadier growth can partially smooth volatility.

A clear trend is that reliance on trading should decline as use cases broaden, competition intensifies and incremental capital sources shift. The mix should gradually diversify.

The model Coinbase seeks is to attract users with lower fees, then expand wallet share via integrated financial services. For now, it leverages compliance advantages to offer lower rates to institutions.

As stablecoins penetrate cross-border B2B and RWA tokenization, and as the asset class scales, Coinbase is positioned to be the ‘pick-and-shovel’ provider in a new gold rush. That is the strategic bet.

II. Riding sentiment, ecosystem expands in small steps

First, a look at Coinbase’s user ecosystem. Engagement softened into year-end.

As markets cooled rapidly after Oct, Q4 net transacting users fell by ~0.2mn to 9.1mn (back-solved from the 9.2mn full-year average). Avg. trading per user fell 4% QoQ and was 45% below last year’s peak.

Asset scale also shrank in tandem, with end-quarter client assets plus segregated custody at $38.1bn, down 27% QoQ. Our rough math suggests most of the decline came from price, with ~2.5% net new inflows. Beyond product breadth (e.g., stock tokens, derivatives), acquisitions like Deribit, Echo and Liqufi may have brought in funds directly.

III. Trading still dominates, but share losses slowed

Near-term fundamentals remain trading-heavy at ~55% of revenue, making earnings sensitive to sentiment. That said, Q4 volume share declines moderated vs Q3, likely helped by a richer derivatives mix.

Industry-wide, market cap retreated to $3tn with spot volumes down 7% QoQ. Coinbase fell 8% QoQ with a slight share loss, but the pace slowed vs Q3 (The Block data).

We see broker-affiliated exchanges and DEXs as Coinbase’s main competitors. Lost share likely migrated to those venues.

Broadening derivatives is an effective hedge against spot slowdowns. With Deribit fully consolidated in Q4 (partial in Q3), derivatives volumes and open interest rose meaningfully QoQ, and more futures products listed.

As derivatives penetration rises, it can offset pressure on blended take rates. In Q4, institutional take rates ticked up, likely due to heavier derivatives usage, which typically carries higher fees than spot.

Still, revenue is driven by scale and volatility, and take-rate compression is a structural trend. Q4 trading revenue was $980mn, -37% YoY and -6% QoQ, declining less than volume but below expectations.

III. Subscriptions & other: stablecoins ‘stable’, Base keeps expanding

Q4 subscription revenue was $730mn, -2.6% QoQ; next-quarter guidance midpoint is $590mn (-15% YoY), both below the Street. ‘Other’ revenue was $71mn, down roughly $4mn QoQ.

By line item: further detail follows. We highlight the main drivers.

(1) Blockchain rewards (staking) at ~10% of total revenue fell 29% YoY and 18% QoQ, driven by token prices. ETH and SOL each dropped 30%+ QoQ in Q4.

(2) Stablecoin revenue at ~20% of total continued to decelerate, largely reflecting market issuance trends. Coinbase’s share of circulating USDC still rose QoQ to 23% in Q4.

USDC in circulation ended the quarter at $76bn, with QoQ growth slowing to 8%, below our prior expectations. As a public data point, this was likely priced in over the quarter.

Circle has been expanding USDC’s ecosystem with more exchange partners, so we do not rule out Coinbase increasing self-holdings to defend its position. (Since the company stopped disclosing self-held USDC this quarter, Dolphin estimates a 60% QoQ increase, from $3.7bn to a $6.0bn balance.)

User-held USDC on Coinbase also rose 3% QoQ. The platform passed through 52% of reserve interest to users in Q4, up 8ppt vs Q3. Whether this ‘interest-like’ incentive aligns with rules against stablecoin ‘deposit-like’ interest remains debatable.

(3) ‘Other’ mainly includes custody fees (consolidated from Q1 2025), Base sequencer fees and small payment revenues. Q4 delivered $150mn, +13% YoY and +6% QoQ, arguably the only bright spot in the print.

Per The Block, Base revenue allocated to Coinbase rose to ~$16mn in Q3 on ~$1.2bn of volume, from ~$14mn on ~$0.9bn in the prior quarter. Management is exploring options for a native token for Base.

IV. Earnings under ‘double pressure’

With top line under pressure, Coinbase kept spending to expand, with higher M&A integration, R&D, marketing and user incentives (stablecoin usage) QoQ. The investment cadence remained firm.

Next-quarter opex guidance is $925–975mn, flat QoQ. This implies no meaningful pullback despite soft trading.

Core operating profit was just under $300mn in Q4 (ex investment gains and net interest), down 41% QoQ. Last year’s Q4 was a peak, making YoY less relevant.

Adj. EBITDA came in at $570mn with a 32% margin, down 11ppt QoQ. Profitability compressed on lower scale and higher spend.

Dolphin Research on ‘Coinbase’ – prior notes:

Oct 31, 2025 3Q25 call highlights ‘Coinbase (Trans): Driving assets fully on-chain around trading and payments’

Oct 31, 2025 3Q25 results ‘Coinbase: Short-term recovery as expected, long-term ecosystem needs faster expansion’

Jul 3, 2025 Initiation (Part III) ‘Coinbase vs Circle: A symbiotic struggle in the stablecoin arena’

Jul 2, 2025 Initiation (Part II) ‘Stablecoins: Don’t doubt it — Coinbase’s iPhone moment’

Jul 1, 2025 Initiation (Part I) ‘Coinbase: If on-chain explodes, can the ‘pick-and-shovel’ truly win by default?’

Risk disclosure and statement: Dolphin Research disclaimer and general disclosure