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 🤑 Earnings szn

You know how Empire pulls back the curtain to give you that look inside the crypto industry?

Well, the fun part about Wall Street’s earnings season is that it does the work for us. For the public crypto companies, I mean.

We’re in the thick of it, and last night had a ton of earnings-related news. There are two things I want to focus on this morning. 

The overall tone of the earnings call after the results were announced was positive, with Coinbase executives including Brian Armstrong updating analysts on how the business is faring this cycle. 

Of course, Armstrong spent a chunk of the non-Q&A portion discussing the company’s political efforts. Not a big surprise given that the election is less than a week away. 

He also affirmed something we’ve talked about numerous times here: That regulatory clarity on the institutional side will be a “massive source of inflow of capital.”

Overall, the $1.2 billion revenue reported by the exchange was impressive albeit just shy of analyst expectations for $1.25 billion. To put it in perspective, that figure is nearly double the amount reported in the same quarter last year ($674 million).

The real figure to watch going into the next (and final) quarter of 2024 is the total trading volume, which was down 18% QoQ to $185 billion. That metric will stand out if we start seeing more pickup in the overall spot market.

That second thing I teased? An interesting tidbit in the SEC filing from Reddit yesterday. The doc itself is pretty run-of-the-mill, but buried within it, the newly-public social media company said that it sold off the “majority” of its crypto portfolio, which had primarily been made up of bitcoin and ether. 

All in all, it looks like Reddit sold crypto for roughly $6.8 million. How much of that was divided up between bitcoin and ether is unclear, unfortunately. In the filing, crypto is just grouped into intangible asset sales.

We know, from previous disclosures, that Reddit had exposure to crypto. Although, in an S-1 filing ahead of its public debut, the firm had previously invested its “excess cash reserves” in bitcoin and ether. We also know that the company held a bit of MATIC, but it was immaterial. 

So there you have it: COIN’s readthrough shows the potential setup for a very interesting fourth quarter, while Reddit’s backing away from holding crypto.

— Katherine Ross

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• BTC is where it was yesterday: $72,200 and 2% below its March all-time high. ETH is down 0.7% to $2,640.

• TIA has slipped another 6% following its 80% unlock — bringing its total losses for the week to 23%.

• October is set to close with the highest DEX volumes since June, currently at $13.32 billion, per DeFiLlama.

• ETH staked via Binance has risen 7% in the past week to 1.78 million ($4.32 billion).

• BTC open interest is at another record high: $43.81 billion, beating yesterday’s $43.61 billion.

 🤩 It’s in the name

Air traffic control is often pegged as the most stressful job in the world. 

Managing private key security at Coinbase might just take the cake. 

Coinbase is big. Influential. On the front lines of the war for hearts, minds and regulatory clarity.

There’s no greater way to prove Coinbase’s standing in the crypto space than by just how much of it is given to it for safekeeping.

We know now that Coinbase users held $272.7 billion in crypto at the end of September, plus an additional $4 billion in cash. 

That’s nearly $3.5 billion more crypto than at the end of June — probably in part boosted by rising asset prices — and $200 million less cash than the prior period.

Then, there’s all the crypto tied up in Grayscale’s suite of ETPs and ETFs: $22.62 billion at Q3’s close, per Arkham Intelligence data. Grayscale went all-in on Coinbase Custody back in 2019. 

Another $31.7 billion is custodied on behalf of other ETF issuers like BlackRock, Bitwise and Ark/21Shares. 

Coinbase’s final total for Q3: $331 billion, the equivalent of 15% of the total crypto market cap at the time.

And if you want to go even deeper: Chainalysis recently estimated that about 1.8 million BTC could be lost forever — or 9.1% of the circulating supply. 

Scrub that from crypto’s market cap, along with the 1.1 million lost Satoshi coins, and Coinbase would technically be sitting on closer to 17% of crypto’s remaining paper value.

No doubt, Coinbase recognizes the significance of it all. Still, the way things are going, Coinbase could go down as one of the most aptly named companies in fintech history: 

A base for literally all the coins.

— David Canellis

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• BlackRock’s IBIT recorded a record day of inflows topping $872 million — a figure not seen since it went live earlier this year.

• Coinbase is committing $25 million to the Fair Shake PAC for the 2026 midterm elections. 

• Ex-FTX executive Nishad Singh won’t face prison time, Judge Lewis Kaplan ruled. He was sentenced to three years of supervised release.

• MicroStrategy can’t stop, won’t stop. It announced intent to raise $42 billion (!) over the next few years to buy more bitcoin. 

• Arkham Research found that the US government traded off ANT tokens that were seized from Alameda Research for ETH.

Q: What’s the scariest thing in crypto right now?

 The Atlantic ran a piece yesterday called “The Worst in Crypto Is Yet to Come.”

Feel free to read it and have your own opinion, but there’s just one point buried in there that is the subject of some of my nightmares: Could crypto be used to skirt securities laws?

Basically, we don’t want people like Sam Bankman-Fried to run around marketing tokens as commodities simply because a security label requires a lot of disclosures and filings. The aim is to protect retail in the next cycle, and prevent another crash and burn like what we saw with FTX.

Horror! Do I think that it would ever be intentional? Not from the folks working hard to legitimize and make crypto safer, but we know that there are always bad actors afoot.

The SEC has obviously gone on a tear with the securities labeling. There’s also a legitimate discussion to be had on what makes one crypto a commodity, like bitcoin and ether, versus what could make another a security.

So, to put it simply, I’m concerned about crypto becoming a pawn in an effort to skirt existing securities laws in bad faith. 

I don’t think that’s a popular — or even useful — use case right now, but I also don’t want anyone to get a chance to ruin what the industry is working hard for: regulatory clarity. 

— Katherine Ross

Here’s the spookiest story in crypto right now.

If a government can infiltrate the supply chain to place explosives in 5,000 beepers destined for Hezbollah, imagine what someone could do with your cold wallet.

Happy Halloween!

— David Canellis