That line in Gemini’s Q3 earnings report—“spot trading volume up 18% QoQ”—is probably best not read as a sign of recovery just yet. The report itself says that of the $4.5 billion in trading volume this quarter, about $1.2 billion, or 26%, came from trades between external customers and Gemini’s own market makers. The stated drivers of growth were “increased institutional Zcash trading” and “expanded affiliated market making.”
When your own market makers account for a quarter of the volume, it’s no surprise that volume is up. Whether that volume represents genuine demand is another matter.
The other figures are all from the official GlobeNewswire release dated Nov. 12:
Total revenue was $40.9 million, down 19% year over year and 10% quarter over quarter. Exchange revenue was $13.4 million, down 47% year over year. Trading volume was $4.5 billion, versus $16.4 billion in the same period last year, down 73%. Monthly active trading users were 577,000, basically unchanged. Credit card revenue was $15.5 million, already higher than exchange revenue.
Two things I worked out myself.
First, the take rate. $13.4 million in revenue divided by $4.5 billion in trading volume comes to about 0.30%. Working backward from the 47% decline, revenue in the same period last year was about $25.3 million; divided by $16.4 billion, that’s about 0.15%. Volume fell 70%, but the take rate doubled. That suggests the business has mainly lost large, low-fee trades, while retail traders and small institutions paying higher fees remain. This mix can support margins, but not scale.
Second, “losses narrowed sharply.” Adjusted EBITDA showed a loss of $11.6 million, looking much better than the $74 million loss last quarter. But the company also says that figure includes realized and unrealized gains/losses on crypto assets and crypto loans to related parties. Those swung from a $25 million loss last quarter to a $25.7 million gain this quarter—a $50.8 million swing. Excluding that $25.7 million gain, adjusted EBITDA would have been a loss of about $37.3 million. The boost from crypto prices will reverse if prices don’t cooperate next quarter—and we’ve all seen what the market has been like since October.
Operating expenses were $119.9 million, nearly three times revenue. Cash on hand was $194.1 million, down from $252.2 million at the end of last year. Cost-cutting is real, but revenue is being propped up by credit cards and interest, while the trading business continues to shrink.
Gemini 2.0 is about building regulated infrastructure for others to use; there’s nothing wrong with that direction. But a quarter of this quarter’s trading growth came from its own market making, and a big part of the earnings improvement came from crypto prices. It’s too early to use this earnings report to claim a turnaround.
#Gemini
When your own market makers account for a quarter of the volume, it’s no surprise that volume is up. Whether that volume represents genuine demand is another matter.
The other figures are all from the official GlobeNewswire release dated Nov. 12:
Total revenue was $40.9 million, down 19% year over year and 10% quarter over quarter. Exchange revenue was $13.4 million, down 47% year over year. Trading volume was $4.5 billion, versus $16.4 billion in the same period last year, down 73%. Monthly active trading users were 577,000, basically unchanged. Credit card revenue was $15.5 million, already higher than exchange revenue.
Two things I worked out myself.
First, the take rate. $13.4 million in revenue divided by $4.5 billion in trading volume comes to about 0.30%. Working backward from the 47% decline, revenue in the same period last year was about $25.3 million; divided by $16.4 billion, that’s about 0.15%. Volume fell 70%, but the take rate doubled. That suggests the business has mainly lost large, low-fee trades, while retail traders and small institutions paying higher fees remain. This mix can support margins, but not scale.
Second, “losses narrowed sharply.” Adjusted EBITDA showed a loss of $11.6 million, looking much better than the $74 million loss last quarter. But the company also says that figure includes realized and unrealized gains/losses on crypto assets and crypto loans to related parties. Those swung from a $25 million loss last quarter to a $25.7 million gain this quarter—a $50.8 million swing. Excluding that $25.7 million gain, adjusted EBITDA would have been a loss of about $37.3 million. The boost from crypto prices will reverse if prices don’t cooperate next quarter—and we’ve all seen what the market has been like since October.
Operating expenses were $119.9 million, nearly three times revenue. Cash on hand was $194.1 million, down from $252.2 million at the end of last year. Cost-cutting is real, but revenue is being propped up by credit cards and interest, while the trading business continues to shrink.
Gemini 2.0 is about building regulated infrastructure for others to use; there’s nothing wrong with that direction. But a quarter of this quarter’s trading growth came from its own market making, and a big part of the earnings improvement came from crypto prices. It’s too early to use this earnings report to claim a turnaround.
#Gemini