Data & Insights Recap: Coinbase's Q4 earnings, Pudgy Penguins prices soar

Top performer

Source: Company Filings

• Coinbase reported bumper Q4 earnings on Thursday of last week. 
  • The publicly traded exchange beat Wall Street estimates for revenue by over $100 million, bringing in $953.8 million across trading and other services and outperforming Q3’s revenue by 41%. 
  • The main factor helping drive Coinbase’s massive performance surge was the rebound in trading volumes during the last quarter of 2023. The $154 billion in volume reported from October through December of last year is the highest amount since Q3 2022.
• On a similar note, this comeback in trading volumes brought back into focus the original source of income for the exchange.
  • While trading volumes declined through much of last year, Coinbase still continued to beat estimates, primarily driven by interest income that it was earning on its USDC holdings. 
  • And with trading so slow, Coinbase was not bringing in a lot of money through transactions, causing a massive shift in how Coinbase was earning its profits. In the first three quarters of 2023, over half of Coinbase’s revenue came from non-transaction sources, which includes interest income as well other things like blockchain rewards on its staked assets and certain subscription fees. 
  • The share of Coinbase’s revenue coming from means other than transaction fees has been strictly rising since Q4 2021. This was not surprising as Coinbase continued to expand its product offerings, which gave it new revenue streams, and the recent high-interest rate environment contributed to the jump in interest income, as well. But it was somewhat jarring to see so much of Coinbase’s business move away from its original exchange pursuit. 
  • But for the first time in over two years, we saw a drop in Coinbase’s share of non-transaction revenue. And for the first time since 2022 over 50% of Coinbase’s profits came from trading. Non-transaction revenue was still a sizable piece of the pie at 44.51%, but the shift still shows how these high excitement periods in crypto can still reignite Coinbase’s core business. Transaction revenue was $529 million for last quarter, an 83% jump compared to Q3.
• Unsurprisingly, the great Q4 metrics sent Coinbase’s stock, COIN, on a tear. It briefly surpassed its pre-ETF approval peak of $186.36 and climbed to over $190 on Friday, marking the highest the stock has been in over two years. However, it closed the day around $180 after dropping from the spike at open.

Back in range

Source: The Block, Coinglass

• 2023 was a tough year for Binance for a number of reasons. For starters, it faced an over 20% decline in spot market share amidst regulatory pressures and the end of a zero-fee bitcoin trading promotion. The exchange giant also settled with the Department of Justice for $4.3 billion, in which its prominent ex-CEO Changpeng Zhao stepped down from his role. 
  • Binance also had pressure put on its crypto futures dominance when it was flipped by the Chicago Mercantile Exchange, or CME, as the exchange with the most bitcoin futures open interest back in November of last year. 
  • It was a signal that more institutional interest was pouting into crypto ahead of the spot bitcoin ETF approval. Particularly, these investors were more interested in piling into bitcoin bets, as Binance still held a sizable lead in terms of ether futures open interest. 
  • The lead that CME had over Binance got quite significant, especially right around the time of the ETF launch, with there was a lot of speculative fervor in the market. On January 12th, CME reached $6.4 billion in bitcoin contract open interest, compared to just $4.5 billion on Binance. But January 12th marked a relative peak for CME; their OI slumped back down to $4.37 billion on February 7th, actually falling slightly below Binance for the first time in months. 
• But Binance’s lead did not last long, as CME’s OI bounced back after that drop and is now at a new high of $6.8 billion over the weekend.
  • However, it did reveal that CME’s open interest figures were very much tied to price. While CME saw its OI slide in the wake of the post-ETF selloff, Binance’s open interest held steady, indicating that more traders were actually taking up futures positions on Binance and allowing the value of its outstanding contracts to hold steady despite the price dip.
  • Open interest on both exchanges has surged this past week as bitcoin itself has picked up in price. And while CME is still in the lead over Binance, the gap between the two has significantly narrowed compared to mid-January. 
  • Before the ETFs launched, CME served as one of the primary ways for U.S. institutional investors to gain exposure to bitcoin, whereas now they can trade the ETFs, which could help Binance gain ground if U.S. business moves to prefer the low-fee ETFs, which also offer more direct price tracking. 
  • But, depending on the trading strategy, futures could still be a preferred tool for some of these investors, and with bitcoin climbing back above $50,000 territory, it's likely we will see some more major players try and dive into the U.S. market.

Pudgy Peng-WINs

Source: The Block

• This has come up a few times over the past couple of months, but the people love Pudgy Penguins. 
  • While a lot of NFT hype recently has been focused on Bitcoin and Ordinals. Pudgy Penguins has continued to make headlines with their toy deal with Walmart and their upcoming Pudgy World web3 game.  
  • For holders of the collection, they earn royalties on sales of the associated toy brand, and will also earn royalties on purchases related to the new game. Pudgy Penguins seems to be an NFT collection that is dedicated to using their IP to earn revenue, and they seem committed to distributing some of that wealth back to their community. 
  • So it’s not super surprising that Pudgy Penguins has been one of the best-performing NFT collections more recently. 
• In particular, the weekly average sale price for one of these penguin-faced collectibles shot up to $62,510 this week. It’s a new high for the project, which, since launch in July 2021 through November of last year, never saw its weekly average sale price top $15,000. The prices for this collection have steadily increased through the new year. 
  • Its popularity now is a bit unexpected since the Walmart announcement was all the way back at the end of September, and while the news of the game was more recent, there are still somewhat sparse details about it (although, allegedly, they are building a version for the Apple Vision Pro). 
  • But nonetheless the collection remains extremely popular and is touted by some popular crypto figures like the CEO of the data platform Nansen. 
  • The recent renewed hype around the collection helped push weekly NFT volumes on Ethereum to the highest they’ve been since March of last year. 
  • The collection is also climbing up on the market cap of Bored Ape Yacht Club, which would take it to the second largest NFT collection by that metric, although it still has a bit of way to go. CryptoPunks sits comfortably in the top spot with a market cap of almost 560,000 ETH. 
  • It is a testament to the success of innovative NFT projects, as the penguins are one of the only collections to have made much progress in terms of value appreciation this year. Bored Apes have been hovering around an average weekly sale price of $60,000 since October. And many collections are struggling to achieve valuations akin to late 2021 and early 2022, whereas Pudgy Penguins has managed to surpass that. 

Stake it 'till you make it

Source: DefiLlama

• Restaking is all the rage right now. There seem to be new restaking platforms popping up all over, each one managing to secure a decent level of popularity.
  • And you might be wondering, what is restaking? Doesn’t that sound paradoxical? Well, not exactly. It stems from the idea that you can put your assets to work, securing multiple things. And in turn this gives newer protocols an opportunity to borrow from Ethereum’s vast security, creating a “shared security” model. It should help newer projects using proof-of-stake consensus to be able to quickly access a large trust network, circumventing the troubles of trying to bootstrap one themselves. 
  • Eigenlayer, the most popular restaking platform, allows both native ETH stakers and those holding liquid staking derivative tokens to utilize their deposited ETH to secure other blockchains and services. Eigenlayer “rents” their economic security, which helps earn revenue for Eigenlayer and rewards for stakers. The restakers earn yield for taking on extra risk and responsibility. 
  • Liquid restaking, which is the same as restaking but it comes with a staking derivative token, has also become quite popular, with Puffer Finance reaching almost $1 billion in TVL after launching at the start of this month. Puffer got backing from Binance Labs, and another restaking protocol, Renzo, also announced an investment round in January. 
  • ClayStack, originally a liquid staking protocol, has also made a pivot into restaking and is utilizing Eigenlayer to help them do that. 
  • It’s not so surprising that restaking is so popular. Earning more yield is something that is very attractive to many in the crypto space, and the shared security model is very beneficial for new projects. Also, many people suspect that a token could be in the future for some of these restaking protocols, and they want to be in on the airdrop.
• But restaking has recently become one of the top protocol categories by TVL, growing from $2.16 billion on February 5th to over $7 billion recently. Eigenlayer has become the fourth largest project on Ethereum by value locked, following Lido, Aave, and Maker.  
  • The recent surge happened after Eigenlayer uncapped its deposit window. The start of this uncap was on February 5th and lasted until February 9th, during which Eigenlayer’s TVL surged by over 170%. 
  • Eigenlayer has done a few deposit cap increases in the past, with the current cap set at 200,000 ether for each liquid staking token. Eventually, the goal is to do away with the cap and enable a “permissionless, neutral environment while promoting decentralization.”
  • While the temporary lift was done with the intent of fostering organic growth, earning restaked points ahead of a potential airdrop was probably also a big driver.

Testing it out

Source: SocialBlade

• If there’s one thing we learned from Blast, it’s that you don’t necessarily need to have a functioning product to garner a lot of popularity. Just knowing something is coming can often be good enough. 
  • This isn’t necessarily bad; tons of products in the real world drum up hype before actually going to market. Music artists also tend to announce albums way before they release them. 
  • Berachain does seem to be an instance of a project that has garnered quite a lot of attention in the lead-up to its anticipated Q2 launch. 
• What is Berachain? 
  • The project announced $42 million in funding back in April 2023, a time when layer 1 investment was very en vogue, with Sei Labs and VRRB Labs amongst those with funding rounds that hit the news earlier in the year. 
  • Berachain is a Cosmos-based, EVM-compatible layer 1 that aims to use “proof of liquidity” consensus. The ecosystem will host three tokens: bera (the native gas token), honey (a native stablecoin) and BGT (the "non-transferrable" Bera Governance Token). 
  • The proof of liquidity mechanism is similar to delegated proof-of-stake and is meant to help unite incentives between security and liquidity. Users can only use funds to contribute to network security if they first contribute liquidity to DeFi primitives. Users earn BGT by providing liquidity to DeFi protocols within the network, and it is by nature soulbound (basically, people can’t sell it) and can only be converted into bera via a one-way process. Users can delegate their BGT to validators to earn honey. So, this process intertwines the process of supporting DeFi protocols within network security by only making BGT earnable through liquidity provisions.  
• Back in January, the team announced their public testnet called Artio after previously hosting a private testnet on which 50 teams deployed contracts.
  • And it seems this testnet launch really got people excited about what is to come. Berachain has had its X account since December 2021 but has only typically been gaining tens to hundreds of new followers a week, occasionally reaching the single-digit thousands. But since the testnet went public, the account has gained tens of thousands of followers every week, gaining over 100,000 followers for the first four weeks since the announcement. 
  • The account now bolsters over 700,000 followers and Berachain is one of the most awaited mainnet launches of 2024. While new followers have slowed a bit coming into February, the numbers are still much smaller than before the public testnet came on the scene.