Upbit vs Coinbase Comparison - 1Q22

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Coinmonks

6 min readJun 10, 2022

[1Q22 Financial Statements Comparisons]

For our latest from the CEX financials series, below are the 1Q22 comparisons between Upbit and Coinbase, the biggest exchanges in Korea and the US respectively.

Please see our previous posts:
1) At-a-glance: Upbit Q1 2022 Income Statement Highlights
2) At-a-glance: Upbit Q1 2022 Balance Sheet Highlights

Upbit vs Coinbase Comparisons

1) Income Statements

A. Comparison of Top-Line and OP

* Please click the image for expanded view *

On a YoY basis, both companies’ top-line declined by the same magnitude (>30%).
Coinbase’s revenues in 1Q21 and 1Q22 have always been higher than that of Upbit by more than 3x.
Revenue decline and OPEX increase (both at more than 100% YoY) resulted in OPM decline of more than 23%ppt for Upbit and 102%ppt for Coinbase.
While its revenue base is more than 3x higher than that of Upbit, Coinbase’s OP hasn’t been able to keep its bar as high.
Considering Upbit’s $ translated numbers were hit even harder due to the change in KRW/USD YoY average rate, Upbit did a better job at keeping margin from declining while Coinbase turned red this quarter.

B. Coinbase Revenue Breakdown

Compared to Upbit, Coinbase provides a lot more details regarding its revenue breakdown.
Most of Coinbase revenues’ (as is the case for Upbit) still come from transaction fees (87% of total revenues).
Retail still takes the lion’s share at 95% of total transaction revenue while the YoY decline was stronger from the institution side (-44.8% vs -33.6%).
Interesting to note that Coinbase’s subscription and services revenues increased 169% YoY (despite the 35% top-line decrease) driven by “blockchain rewards” (primarily comprised of Staking revenue in which the Company participates in networks with POS consensus algorithms).

> Currently, none of the Korean CEX are active in this area due to external pressure (i.e. “how can you be a validator + list it on your own exchange + sell it there” narrative).

Coinbase’s custodial fee increased more than 35% YoY but only represents less than 3% of total revenues.

C. Coinbase Trading Volume/Revenue Breakdown

Unlike Upbit (so far) Coinbase’s disclosure for trading volume and type of assets provides much more details
Based on the above numbers and other publicly available info, Upbit’s trading volume is much higher than that of Coinbase (could be 10x higher > Once again shows the enormous power of Korean retails)
Of note, while retail trading volume decreased significantly (38% YoY) institutional trading volume saw a +9% YoY growth
BTC and ETH combined trading volume was a little shy of 50% in 1Q22 for Coinbase; It would be fair to assume Upbit’s BTC and ETH combined volume % was lower than this (and Korea in general; aka “altcoin kingdom”).

2) Balance Sheets

Both companies have a substantial amount of cash and cash equiv. (More than $5bn) while Upbit’s cash as % of total assets is much higher at over 65% (vs Coinbase’s 29% levels).

> Most Korean CEX do not report customers’ cash and/or digital assets as their assets on the balance sheet; Upbit reports customers’ cash deposit in the liabilities section (approximately $4.45bn in 1Q22); Upbit was the only CEX in Korea earning an annual 0.1% interest income from this area whereas all other CEX didn’t earn a single dime as interest income (this was a hot potato in Korea so we do expect changes later on); Anyhow Coinbase reports this as assets and is earning interest from it as well.

Coinbase owned 2x to 3x more crypto than Upbit (in $ terms). This makes sense given 1) Upbit’s commissions mostly come from KRW trading, 2) due to regulations, Korean CEX cannot easily acquire nor dispose of cryptos so they aren’t active in acquiring (which must be much easier for Coinbase), and 3) Limited to quasi-no-use-case for Korean CEX due to regulations (while Coinbase can lend, hedge, or use such assets for OTC deals, etc).

The above numbers are not directly featured on the balance sheet but on the notes.
Bithumb discloses customer assets on its platform (whereas Upbit does not) and if we apply the customer cash balance ratio between Upbit and Bithumb, we arrive at $36.5bn for the former whereas Coinbase disclosed $246bn for the same category.
None of the current CEX include the above figures on their balance sheet (as it is not an obligation under current standards) but if there are any changes in the future, this could really change numbers for all of them by a dramatic amount.

Meanwhile, if we look at the % breakdown of customer’s assets on Coinbase, we can notice BTC/ETH combined accounted for around 66% of total.

> Excluding fiat from the $246bn mentioned above, 42% * $246bn = $103.3bn / BTC price at the end of March was $45,528 / $103.3bn over $45,528 = 2.269mn BTCs

>> If we do the same for ETH we arrive at 17.981mn ETHs

>>> So Coinbase approximately held on to 2.269mn BTCs and 17.981mn ETHs on behalf of its customers!

3) Simple Valuation Comps for Fun

Now that we have briefly gone over Korea’s largest CEX and US’ largest CEX numbers, let’s juggle around for a simple valuation comparison. Coinbase is listed and actively traded on NASDAQ whereas Upbit has yet to be listed. We will use Coinbase as a proxy for what info is publicly available for Upbit.

* Recent consensus revenue estimates (from Bloomberg) are at around $5bn (-36% YoY) so the above numbers are a little more conservative.

Roughly speaking, Coinbase is currently trading at 3.9 PSR and 2.8x book.

We come up with a market cap range of KRW 6.67tn ($5.3bn) ~ KRW 9.14tn ($7.3bn) which translates into Coinbase’s value at 2.5x to 3.4x Upbit.
Of note, the PBR driven Upbit market cap of KRW 9.14tn is not so different from recent numbers stated on several Korean unlisted stock platforms and private transactions; We believe Coinbase value post listing is acting as a strong proxy for Upbit’s valuation given similarities (ie. top-line decline / high concentration on crypto trading revenues etc); Now whether Coinbase deserves more than 3x market cap compared to Upbit (or whether Upbit is only half or 1/3 of Coinbase’s value) is for the market to decide.

> Both companies are subject to huge fluctuations (just like the crypto market prices) especially if you take into account Coinbase stock price has declined 72% vs beg of this yr while Upbit was valued at around KRW 20tn last November when Hybe (Korean pop band BTS’ agency) acquired 2.5% stake in Dunamu.

Please stay tuned for more Korean CEX numbers in the coming weeks!

Written by Eric Yoo, Co-Founder at Trinito, and contributions from SungPil Huh, Head of Investment at Trinito.

#Upbit #Coinbase #POS #CEX #Bithumb #BTC #ETH #digitalassets
#crypto #NASDAQ #Dunamu #Hybe #BTS