Coinbase Global COIN released its second-quarter earnings report on July 31. Here’s Morningstar’s take on Coinbase’s earnings and stock.

Key Morningstar Metrics for Coinbase GlobalWhat We Thought of Coinbase Global’s Q2 Earnings

Coinbase reported weak second-quarter results as lower cryptocurrency volatility led to a sharp sequential decrease in trading volume. Net revenue rose 2.9% from last year but fell 27.6% sequentially to $1.42 billion.

Why it matters: Coinbase’s second-quarter net income was strong, at $1.43 billion versus just $36 million last year. However, this was entirely due to unrealized investment gains. Adjusted net income was only $33 million, as low cryptocurrency market volatility proved to be more of a headwind than expected.

Coinbase’s overall cryptocurrency trading volume decreased 39.7% sequentially, while retail trading volume, which carries much higher fees, dropped 44.9%. This led to a 39.6% decrease in transaction revenue to $764.3 million, which was the primary cause of the disappointing quarter.Subscription and service revenue was more resilient, increasing 9.5% from last year but decreasing 6.1% from last quarter, to $655.8 million. That said, the sequential decrease was primarily from Coinbase’s lower-margin staking business, and overall, we consider this a positive result for the segment.

The bottom line: As we incorporate these results, we expect to maintain our $205 fair value estimate for no-moat-rated Coinbase. Despite recently increasing our fair value estimate, we see the shares as significantly overvalued. We believe that the market is projecting too much future growth for the firm.

As this past quarter demonstrates, cryptocurrency prices and trading activity are inherently volatile, which contributes considerable volatility to Coinbase’s quarterly results. We also think regulatory clarity will lead to additional competition, given the firm’s premium pricing.On a more favorable note, Coinbase’s stablecoin business continues to perform well. We see this segment as better defended from cryptocurrency’s volatility and future competitive pressures. However, the business does expose Coinbase to interest rate risk.

Fair Value Estimate for Coinbase Global

With its 2-star rating, we believe Coinbase’s stock is overvalued compared with our long-term fair value estimate of $205 per share, which translates to 23.6 times our 2025 earnings projection. Around $7 of the increase comes from earnings since our last update. Another $13 comes from higher stable coin revenue projections. USDC’s market capitalization increased rapidly in the final months of 2024 and so far in 2025.

Coinbase’s stablecoin revenue comes from interest on the collateral behind USDC, meaning that rising market capitalization feeds directly into the firm’s top line. Additionally, the portion of USDC being held on Coinbase’s platform has risen over time, helping offset the impact of lower interest rates on its stablecoin revenue. The rest of the increase comes from higher trading revenue expectations as we adjust our model to reflect a continued rally in cryptocurrency prices.

Read more about Coinbase Global’s fair value estimate.

Economic Moat Rating

In our view, Coinbase has no economic moat despite being the leading cryptocurrency exchange in the United States. The firm has carved out a strong place in the cryptocurrency exchange industry by positioning itself as a reliable and regulation-compliant platform to buy and sell cryptocurrency in an industry filled with risk, weak security practices, and spotty regulatory enforcement. This has let the company successfully charge fees higher than many of its peers while building a large pool of liquidity. Its reputational advantages have only grown in recent years, following the collapse of one of its largest rivals, FTX, due to financial fraud. While we expect fee compression in the long term, recent events will likely allow Coinbase to continue to charge a premium in the immediate future.

However, Coinbase is inherently reliant on the growth and success of Bitcoin, ethereum, and other cryptocurrencies to generate returns on its invested capital. Cryptocurrency is still highly speculative, and its long-term success and viability are by no means guaranteed. Speculation on future price appreciation remains a key part of the space’s appeal, particularly in the less-known “alt coins,” creating further uncertainty about the long-term value and longevity of prices.

Read more about Coinbase Global’s economic moat.

Financial Strength

Coinbase is in a strong financial position, though it needs to be, as its heavy exposure to cryptocurrency prices and volatility can lead to sharp swings in revenue and profitability. The company ended March 2025 with more than $8.0 billion in cash and almost $3.6 billion in cryptocurrency investments, which include over $2.2 billion in USDC, which is pegged to the US dollar.

These assets are held against $4.2 billion in debt. Keeping strong cash reserves makes sense, given the volatility of the company’s revenue generation. It gives Coinbase room to maneuver during prolonged weak cryptocurrency markets. We think staying relatively unleveraged will be an important step in keeping the company financially secure in the long term through market cycles.

Read more about Coinbase Global’s financial strength.

Risk and Uncertainty

We give Coinbase an Uncertainty Rating of Very High. It gets more than half of its net revenue from trading fees at its exchange business. Fees are charged as a percentage of the underlying assets being traded, creating direct exposure to cryptocurrency prices.

The cryptocurrency market is highly volatile and deeply cyclical. In 2022, Coinbase’s revenue fell more than 59% from the prior year as crypto prices collapsed. Crypto is highly speculative, and the number of active traders on Coinbase’s platform can vary sharply based on market performance. This exposure currently acts to Coinbase’s advantage, but the durability of the current market recovery is a major point of uncertainty.

Read more about Coinbase Global’s risk and uncertainty.

COIN Bulls SayCoinbase has established itself as the leading US cryptocurrency exchange and has a strong reputation for security in an industry filled with risk for tradersCryptocurrency prices increased sharply at the end of 2024, leading to much higher trading volume and revenue for Coinbase.There is a global cryptocurrency market. Regulatory approval from international regulators will let Coinbase expand its operations and increase its global footprint.COIN Bears SayCryptocurrency markets have historically been deeply cyclical, with long periods of low prices and depressed trading volume. This adds considerable volatility to Coinbase’s revenue flow.The regulatory landscape and long-term viability of cryptocurrency remain unclear, with regulators becoming more aggressive in the aftermath of the high-profile fraud and the failure of FTX.Coinbase’s stablecoin revenue depends on interest rates, adding another layer of cyclicality to its results.

This article was compiled by James Ubi.