Cryptocurrency companies spent years monetizing volatility and are now trying to survive without it.
The first-quarter earnings underscored that the days of easy crypto moonshots and hype-based profits are coming to an end. The lower the Bitcoin and ether As prices dried up speculative demand and investors broadly exited risky assets amid macro uncertainty, trading activity across exchanges cooled and individual participation waned. The economic slowdown is also reflected in quarterly updates from publicly traded companies, with exchanges, brokers and crypto finance companies reporting weaker trading and staking revenues and weaker customer activity.
it’s nothing new coinbase and robin hoodfor them, trading was once the lifeblood of the platform. Both companies have been working for years to diversify their revenue by expanding their suite of financial services.
But even non-trading businesses still operate in an industry shaped by crypto boom-bust cycles. And first-quarter earnings, particularly those of a group of companies that entered the public markets last year, showed that there is more urgency to prove that they can generate steady profits even in the face of weak prices and volumes.
“[Investors]have been riding the wave of crypto craze for years…It was a new way for people to go out and trade,” said Vassilis Tsiokas, vice president of growth at Matter Lab. “But we are now seeing cryptocurrencies becoming something bigger and intertwined with the real economy. This means people have higher expectations of these companies. They need to diversify their revenue and expand into new adjacent areas.”
Robinhood kicked off crypto earnings season with a notable failure, with crypto trading revenue down 47%. Meanwhile, user activity shifted to other products, particularly event contracts, with this segment increasing 320% year over year and bringing in $147 million in revenue.
Similarly, although Coinbase’s revenue and bottom line fell short of expectations, it saw promising growth across a variety of services, including event contracts, crypto derivatives (up 169% year over year), and tokenized products.
“We’re trying to diversify what people can trade so that even as the market changes and different behaviors change, we’ll always be able to give people what they want to trade,” Coinbase CFO Alecia Haas told CNBC. “That diversification will help reduce some of the volatility seen in pure crypto-only trading.”
Diverse transactions and infrastructure
geminiThe crypto exchange founded and led by the Winklevoss brothers has made it a priority to stabilize its revenue, which fluctuates depending on the price of cryptocurrencies, by owning the financial infrastructure for forecasting, derivatives, and soon equities. The company also reported a 292% year-over-year increase in revenue related to consumer credit cards in its earnings.
The goal is to “move from a company that is solely focused on cryptocurrencies to a company that is more connected to the market…That should smooth out our revenue at some level,” Gemini president Cameron Winklevoss told CNBC. “So if one asset class is underperforming another, we need to smooth it out and provide a more indexed approach to these different asset classes.”
Shares soared after Gemini’s more upbeat earnings report than its peers and the announcement of a $100 million investment in its future.
strong is also a company grappling with revenue struggles with expansion plans. The exchange’s proposed $4.2 billion acquisition of global transfer agent Equinity is one of the largest M&A deals in crypto history. This will position the company as a capital market infrastructure company rather than “just” a cryptocurrency exchange. The stock price rose on news of the acquisition, but was subsequently sold off due to poor financial results.
and, circle Although more insulated from trading volatility, it is still not secure from the crypto cycles that are driving the usage, liquidity, and adoption of USDC stablecoins. Although it reported a strong quarter, Arc blockchain, its operating system for an agent-based, AI-powered economy, garnered the most attention, allaying concerns about its long-term viability as a stablecoin issuer. The stock price rose about 20%, and even cautious analysts raised their price targets on the stock.
Accumulator turns into asset manager
Even crypto treasury companies, which are publicly traded companies whose sole purpose is to purchase large amounts of cryptocurrencies in order to provide them to their shareholders, are similarly structurally bound to the crypto cycle.
michael saylor’s strategy The clearest example of this came when the company chose to break away from Bitcoin’s “never sell” approach and give shareholders more control. Management announced the change of direction on its earnings call as Strategy reported a $12.5 billion net loss due to weak Bitcoin prices.
“We will sell Bitcoin when it is advantageous for the company,” Von Reh, president and CEO of the strategy division, said on a conference call. “We’re not going to sit back and say, ‘We’ll never sell Bitcoin.'”
In a bull market, it may be strategically easy to issue stock or raise funds to buy more Bitcoin, but in a downturn the strategy becomes riskier and makes some investors nervous.
in sharp link Ether Accumulator repeated the same theme when he made the splashy announcement of his enlistment. galaxy digital We help you allocate a portion of your capital to actively managed on-chain strategies. Wall Street welcomed the evolving “disciplined” and “differentiated” approach as companies seek to separate investors’ returns from quiet markets.
