Coinbase's second quarter earnings report for the quarter ended with a bell.Coinbase's quarter-end revenue was $2.23 Billion, which enabled the company to generate net income of $1.61 Billion in three months. A one-time line item of $737.5 million was a benefit to the company. This was Coinbase's description of a tax advantage resulting from Coinbase's direct listing earlier in quarter.We are now in a strange position where we lean more on the adjusted EBITDA metric of the company, which is a figure we often discount rather than the stricter net profit result. The adjusted metric this quarter is actually more clear about the company's regular profitability. Coinbase reported adjusted EBITDA (EBITDA) of $1.1 billion for the period.Yahoo Finance reports that the company beat all expectations. The market expected revenues of $1.85 billion and an adjusted EBITDA figure of $961.5million.All this is great, but we were able to access fascinating data from the company that could help us understand the current state of the crypto economy. Let's get to the details.Trading volumeWe need two data sets from CoinbasesQ2: The first deal with monthly trading volume and users who transact monthly.It was remarkable to see Coinbase add MTUs in its second quarter. Also, the Q2 trading volume result was impressive considering the declining platform asset figure. Coinbase was able to increase trading volume despite falling crypto prices during the period.Or, as the company stated, "[d]espite any price movements, we saw billions in net asset inflows, and new customers added throughout Q2.Next, we will be looking at the breakdown of trading volume according to source and type.For a quarter, the incremental growth in retail volume between Q1 2021 and Q2 2021 was impressive. However, Coinbase's pace of adding institutional volume in the quarter was even more impressive. It's a remarkable result.The second set of numbers is more relevant for those who are more crypto-focused than others. While bitcoin's trading volume was greater than Ethereum's, the trading volume of other currencies was twice that of bitcoin.What is the meaning of a changing of guard? Three reasons were given by the company, with the most interesting being the second. According to the earnings report:The mix shift was driven [by] significant growth in Ethereum trading volumes, exceeding Bitcoin trading volumes on Coinbase. This was due to growth in the DeFi/NFT ecosystems (where Ethereum plays an important underlying block) and increased demand from our ETH2 staking products.The Ethereum blockchain is essentially enabling volume in its underlying cryptocurrency, ether. Although Bitcoin is the oldest cryptocurrency, its crown may soon be tarnished. At 47%, Bitcoin is still the largest asset on Coinbase.Let's now talk about revenues.Top lineCoinbase's impressive growth in institutional trading volume was a testament to its success, but the company's revenue split remained primarily retail-oriented. Here are the facts:The company's strong second quarter aggregate results can be attributed to the significant increase in transaction revenue from Q1 and Q2. Perhaps more striking was the nearly 100% increase in subscription and service revenue, which grew from $56.4 million Q1 2021 up to $102.6 millions in the most recent period.Coinbase is still transaction-led, but its third line-item in revenue terms is becoming more important.The bad news is here.What about Q3 2021Let's begin with Coinbase's description of the third quarter, from its start to its end:Retail MTUs and total trading volume were 6.3 million and $57.0billion in July respectively. This was due to crypto asset volatility and prices declining significantly in comparison to Q2 levels. The August month-to date retail MTUs levels and trading volume levels have shown a slight improvement over July, but are still lower than earlier this year. We expect retail MTUs to be lower and total trading volume will be lower in Q3 than Q2.However, Q2 MTUs reached 8.8 million, and the total trading volume pro-rated for each quarter was $154 billion. Coinbase's July was far smaller than the Q2 monthly average. Although August is trending better in July, it is still a consolation. However, Coinbase appears to be a smaller company in Q3 than in Q1 and Q2.Coinbases stock has been unable to fly in spite of strong Q2 results. Any serious crypto exchange investor is well aware of the volatility in the sector. A decrease in results after some periods of strong performance is not something to be taken lightly.As of the time this article was written, Coinbase's share price in after-hours trading is $267.55 per unit. This represents a discount of around three-quarters percent. This is not even a haircut.Overall, Coinbase's second quarter was exceptional.
