Are spot Bitcoin ETFs at risk after custodian Coinbase reports $667M loss? The 1.5M BTC question
Coinbase simply posted the type of earnings report that makes two teams of individuals sweat at the identical time.
The first group is apparent, COIN shareholders who noticed the corporate swing right into a loss whereas crypto costs and exercise cooled. Coinbase reported about revenue of roughly $1.78B for the quarter and a lack of -$2.49 per share, when analysts had been on the lookout for a revenue.
Inside Coinbase’s personal supplies, the story seems to be like a enterprise nonetheless producing money, however taking an actual hit on the underside line, with a quarterly net loss of $667M and adjusted EBITDA of $566M.
The second group is much less apparent: individuals who don’t personal COIN at all however nonetheless depend on Coinbase’s plumbing.
If you obtain spot Bitcoin ETFs by means of a brokerage app since you needed publicity with out the headache of wallets and keys, most of that Bitcoin finally sits with Coinbase.
When these ETFs launched, Coinbase grew to become custodian for almost all of the class, together with main merchandise like BlackRock’s IBIT, the place Coinbase is referenced within the fund’s supplies through Coinbase Prime relationships.
Over time, the market has piled into ETF wrappers arduous sufficient that Bitcoin ETPs have been reported holding about 7% of Bitcoin’s most provide, round 1.5 million BTC in that snapshot.
So when Coinbase “misses,” the emotional question folks ask is easy, is the custodian in hassle?
That question is comprehensible, the framing is messy, and the numbers that fly round on social media can get foolish quick. The actual option to look at it’s sensible. Custody is supposed to be boring. Trading is supposed to be cyclical. Earnings are the place these two truths collide.
Coinbase missed, and the miss landed on essentially the most delicate nerve
Coinbase’s quarter fell quick as a result of the a part of the enterprise that appears like a on line casino throughout bull markets stopped performing like one.
Coinbase’s transaction income dropped to about $983M, with shopper transaction income down sharply. That tracks with what lots of common folks have felt over the previous few months, fewer “everyone seems to be buying and selling” moments, fewer viral cash, much less late-night adrenaline.
This can be the place Coinbase has been attempting to vary its identification. Subscription and providers income got here in round $727M within the quarter, and stablecoin income progress was highlighted as a tailwind in the identical reporting.
In Coinbase’s personal shareholder letter, the corporate additionally dropped a near-real-time datapoint, about $420M of transaction income by means of Feb 10, paired with a warning to not extrapolate too aggressively.
That is the push and pull. The market needs Coinbase to turn into steadier. The market additionally punishes Coinbase when the quarter reveals how dependent crypto exercise nonetheless is on temper.
Even the dialog round Coinbase’s enterprise mannequin has break up into tribes.
On X, MilkRoad leaned arduous into the “monetary infrastructure” narrative and pointed to a rising lineup of merchandise and extra steady income streams.
On the opposite aspect, skeptics framed the quarter as an indication that establishments are pulling again and that regulation may crimp stablecoin-related income.
Both teams are reacting to the identical truth, crypto has entered a part the place flows and coverage can matter greater than vibes, and Coinbase sits near each.
The custody question, what occurs if Coinbase has a nasty 12 months
When folks hear “Coinbase is the custodian,” they typically image Coinbase taking directional risk on Bitcoin itself. That isn’t how custody is meant to work.
ETF Bitcoin is held on behalf of the funds. The fund shareholders personal shares within the ETF, the ETF owns the Bitcoin, the custodian safeguards it beneath a regulated framework. The larger operational dangers in custody are issues like controls, compliance, operational resiliency, and the power to satisfy the obligations of a certified custodian, not whether or not Coinbase has a weak buying and selling quarter.
That stated, the explanation that is such a charged subject is belief. Custody is the inspiration that lets a retirement account holder say, “I’m advantageous proudly owning Bitcoin publicity, somebody critical is holding the cash.”
So the actual question for 2026 is much less dramatic and extra particular, does something on this earnings report change the chance of custody failures, disruptions, or a strategic retreat from the custody enterprise.
The quick reply isn’t any; nothing within the public earnings supplies suggests a retreat.
If something, Coinbase has spent years attempting to develop into the components of crypto that behave extra like conventional market infrastructure. The firm remains to be presenting itself as a platform that wishes to deal with extra institutional exercise, extra funds, extra prime providers, and extra world derivatives.
That derivatives level issues. Last 12 months, Coinbase introduced the acquisition of Deribit, which is a really direct wager on the a part of crypto markets the place professionals spend most of their time.
Derivatives additionally are likely to hold buzzing when spot volumes cool, as a result of hedging and positioning by no means totally cease. Custody turns into one spoke in a wheel, and earnings turn into much less hostage to retail temper swings.
A quieter sign, US establishments have been performing risk off
If you wish to perceive why Coinbase’s quarter felt heavy, look at the place the marginal purchaser has been.
Spot Bitcoin ETFs noticed about $4.57 billion in outflows throughout Nov and Dec, and round $1.8 billion has already left because the begin of 2026. That type of circulation regime adjustments your complete really feel of the market.
This is the place the custody angle connects to the earnings angle.
When ETFs are in regular influx, the entire ecosystem looks like it’s being institutionalized in actual time.
When ETFs leak for weeks, it feels just like the grown ups have left the room, even when the long run story stays intact.
Coinbase sits in the course of that emotional swing as a result of it’s each a buying and selling venue and a significant piece of custody infrastructure.
The coverage subplot, stablecoin rewards have gotten the bargaining chip
Coinbase’s CEO can be telling you, in plain language, the place lots of the actual risk sits.
In an X put up, Brian Armstrong stated Coinbase is targeted on a market construction “win-win,” and highlighted that GENIUS handed six months in the past and is being re-litigated, with direct influence on clients. He additionally described ongoing engagement with the White House and banks.
Separately, our protection has framed the present market construction negotiations round a trade-off, progress on a broader invoice, in change for restrictions on stablecoin rewards.
This issues for the earnings dialog as a result of stablecoin-related income is likely one of the cleaner, steadier methods for Coinbase to develop with out counting on retail buying and selling frenzy. If reward-like options get boxed in, Coinbase can nonetheless construct a stablecoin enterprise, however the packaging adjustments, the expansion curve adjustments, and the investor narrative adjustments.
That is why some commentators are treating this quarter as a coverage story as a lot as an earnings story.
So is Coinbase “in hassle,” and what ought to ETF holders watch subsequent
Coinbase isn’t a fragile startup anymore. It is a public firm with a diversified set of companies, and with a strategic place within the components of crypto that establishments really use. A weak quarter remains to be a weak quarter, and the market is allowed to be upset, however disappointment is totally different from structural breakdown.
For the one who holds a spot Bitcoin ETF and simply needs to know if the custodian risk went up, here’s a grounded guidelines that tells you greater than the EPS headline.
- First, watch custody focus and market construction, as a result of focus cuts each methods. It provides ETFs a clear operational spine, and it creates a single level of reputational failure for the class.
- Second, watch coverage headlines round stablecoins and rewards, as a result of the expansion combine shift at Coinbase depends upon it. The White House, banks, and crypto business triangle that Armstrong described in public isn’t theater, it’s the enterprise setting.
- Third, watch flows and the US premium, as a result of they telegraph whether or not establishments are leaning again in. The premium hole protection and ETF outflow reporting are alerts that the tape has been in a risk off temper, and Coinbase’s subsequent few quarters are going to replicate that.
- Finally, watch whether or not Coinbase can hold executing on its “every thing app” ambition, as a result of the long run path out of cyclical earnings is to personal extra of the stack. Coinbase is pushing into inventory buying and selling and prediction markets in its broader enlargement story, and that’s a part of the identical effort to widen what Coinbase is.
The easiest option to say it’s this.
Coinbase lacking earnings seems to be scary as a result of it reminds everybody how cyclical crypto will be. Coinbase holding a big share of ETF custody seems to be scary as a result of it concentrates belief. Put these collectively and also you get an ideal social media storm.
The actuality is much less cinematic and extra necessary.
Coinbase is attempting to turn into the type of firm whose worst quarters look survivable, as a result of the enterprise is constructed on rails and providers that folks hold utilizing when buying and selling slows.
That is the wager buyers are pricing, and that’s the wager ETF holders ought to care about, as a result of boring custody solely stays boring when the operator stays steady, compliant, and dedicated to the job.
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