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SBF
@SBF_FTX
2) First, let's not bury the lede. Coinbase brought in $2B of revenue in 2021Q2. That's a lot.
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SBF
@SBF_FTX
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@SBF_FTX
4) First of all, where does that revenue come from? Most analyses I've read of this get it wrong. They'll talk breathlessly about the growth in subscription revenue (82%!) and point to custody, staking, etc. But that's not the right way to think about it:
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SBF
@SBF_FTX
5) Their "transaction revenue" (trading fees etc.) was $1.9B. Their "subscription revenue" (custody, staking, etc.) was $0.1B. Their subscriptions grew quickly! But that's still just 5% of revenue. 95% is trading fees.
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SBF
@SBF_FTX
6) To be fair, I've been guilty of this too. I'll talk about growth metrics in FTX's margin borrow/lending book, but the truth is that, for FTX--like Coinbase, and like most crypto exchanges--most of the revenue comes from trading fees.
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SBF
@SBF_FTX
7) Another interesting thing to note here: retail vs institutional. In Q2, Coinbase made $1.8B on retail fees, and $0.1B on institutional fees. So 90% of their revenue is from retail trading fees, 5% instos, and 5% custody/staking.
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SBF
@SBF_FTX
1) The other crypto IPO
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SBF
@SBF_FTX
8) Again, reports will talk a lot about the institutional clients Coinbase is winning, and that really is important to the future of their business! But I think they often miss the numbers here. When it comes to retail, Coinbase blows everyone else out of the water.
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SBF
@SBF_FTX
9) In fact! In 2021Q2, Coinbase made $100m revenue on institutional trading fees. FTX made... $100m. I'm actually not sure which made more on institutional trading fees; they're within a few % of each other. But on retail, Coinbase is massively bigger than FTX.
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SBF
@SBF_FTX
11) Coinbase had $1.3B of expenses in 2021Q2 alone. Removing one-time costs (e.g. listing), its revenue was $2B and its EBITDA was $1B. So they had about $1B of expenses in 2021Q2, for a run rate of $4B/year.
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SBF
@SBF_FTX
12) This is roughly evenly distributed between --"transaction expenses" (gas?) --Tech --Marketing --Payroll They spent roughly $250m on each. They had ~2k employees, so that implies ~$400k/year/employee, which makes sense given the workforce.
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SBF
@SBF_FTX
13) For context, FTX's expenses in 2021Q2 were around $50m (excluding buy/burn). The big differences were.... I guess everywhere? I guess 5% of the expenses aren't surprising given we also have 5% of the employee headcount.
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SBF
@SBF_FTX
14) One of the biggest questions I've been thinking about recently: Big companies tend to have big teams. Is that necessary? Is that correct? What happens if you try to build a big company with a medium sized team? Is it efficient and nimble, or is it just overloaded?
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SBF
@SBF_FTX
15) Note that 2021Q2 was probably an unusually good quarter for Coinbase! Volumes and volatility were high. I would expect Q3 to be lower.
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