Coinbase Global, Inc. (COIN) Q4 2021 Earnings Call Transcript

Coinbase Global, Inc. (COIN -5.10%)
Q4 2021 Earnings Call
Feb 24, 2022, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Mel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase fourth quarter and full-year 2021 earnings call. All lines have been placed on mute to prevent any background noise.

After the speaker's presentation, there will be a question-and-answer session. [Operator instructions] Anil Gupta, vice president, investor relations, you may begin your conference.

Anil Gupta -- Vice President, Investor Relations

Thank you. Good afternoon, and welcome to the Coinbase fourth quarter and full-year 2021 earnings call. Joining me on today's call are Brian Armstrong, co-founder, and CEO; Emilie Choy, president, and COO; and Alesia Haas, CFO. I hope you've all had the opportunity to read our shareholder letter, which was published on our IR site earlier today.

Before we get started, I'd like to remind you that during today's call, we may make forward-looking statements. Actual results may vary materially from today's statements. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings and shareholder letter available on our IR website. Our discussion today will include references to adjusted EBITDA, a non-GAAP financial measure.

Non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, GAAP measures. You can find additional disclosures regarding adjusted EBITDA, including a reconciliation to net income to comparable GAAP measure, in our shareholder letter. We are once again using Say Technologies to enable all shareholders to post questions to management. In addition, we will take some live questions from our research analysts.

Before we get started with opening comments, I wanted to start with a question for Brian. Brian, looking back at 2021, it was an incredible year of growth for crypto and for Coinbase. And looking ahead, some people are suggesting we might be entering a crypto winter. So what's your view of the crypto market today? And what's Coinbase's position broadly?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. Thanks, Anil. So I don't think we're entering a crypto winter. In fact, we don't really think about it like that anymore.

I think early on in crypto's history, there was this trend of going through summers and winters. And the thing is crypto is kind of working now. And so I don't expect it to be anything quite that pronounced over time. I think we basically have no idea what's going to happen in the next quarter or the next couple of quarters at any moment in our history with crypto.

It's like trying to predict what the S&P 500 is going to be next quarter or something like that. And so what we do in the absence of that is we just consistently build great products and grow the business because long term, we're incredibly bullish about the potential of this industry. And I think we're just in the very earliest days of this industry, and it has a massive potential TAM. There's a ton of capital being injected into this industry, and a lot of the smartest young people are all rushing in to build companies in this space.

And then with all those thousands of new companies, I think you're just going to see a ton of innovation. So I guess, unlike in past crypto cycles where we might have had summers and winters, crypto is working. We've got major use cases now outside of people just trading it. DeFi has tens of billions of dollars locked up in it.

NFT has been a massive trend and continuing to grow. People are building gaming and social media apps and DAOs and identity systems. And I think what we're really seeing is that Web 3 is kind of the future of how people are going to build all kinds of applications on the Internet, even nonfinancial services applications. So the biggest problem we have is not to think about kind of what's going to happen in any given quarter.

It's how do we actually capture the size of this and scale of this opportunity in front of us when there are so many kinds of multibillion-dollar business opportunities around us. And so honestly, we would love a chance to get it, like catch our breath, right? If things weren't growing quite so quickly, that would almost be better because we have to focus all of our time on scaling when things grow so quickly. Having a chance to invest more in some of these upcoming business opportunities would be the best outcome. So hopefully, that gives you a little bit of a sense of how we think about it. 

Anil Gupta -- Vice President, Investor Relations

Great, thanks. Helpful perspective. So let's start off the call with some opening comments about our results. Brian, back over to you.

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. So I'll give a quick summary of the letter, and then I'll turn it over to Alesia to give more detail. So obviously, 2021 was just an incredible year for Coinbase, the kind of thing that you see very rarely in your lifetime in a business career. Not only did crypto obviously do well, and we can talk about that.

We hit a $3 trillion total market cap. Bitcoin and ETH hit an all-time high. Now one in four U.S. households, according to some third-party research, now own crypto.

So this is becoming mainstream and, of course, Coinbase is not just in the U.S. So crypto did well. But I think Coinbase did incredibly well also and maybe even better. And we're really helping drive this adoption, I think, by making crypto safer and easier to use for people all over the world.

Just to give you one metric, Alesia will go into more detail. So we hit an all-time high in our monthly transacting users of 11.4 million, which is 4x year over year, 400%, pretty incredible. And we're continuing to add assets really quickly. We have a diligent process that we go through to look at what assets we can add from cybersecurity and legal point of view.

We can't add all of the ones that are out there. But the ones that we can add, we added 95 new ones for trading, 72 for custody. More than 50% of all our trading volume this year is on our assets other than Bitcoin and Ethereum. So we just saw this industry really flourish last year and Coinbase really, I think, capitalized on that opportunity and help lead it.

So looking ahead for 2022, look, the opportunity is just as big, if not bigger. I think we're continuing to invest in our suite of products. So we're a multiproduct company. We do have 70-20-10 resource allocation with 70% on our core, 20% on these strategic bets, and 10% on these venture bets and kind of bigger moonshot efforts or more ambitious moonshot efforts.

And so building that suite of products and thinking about how they can all be tied together is really powerful. And I think our fundamental belief is that crypto, it's not just going to be an investment, although that's a massive use case and the first pillar of our strategy. It's not just going to be a new financial system, which is the second pillar of our strategy, and we have lots of products helping make that happen. It's also going to be the new default way that people build applications on the Internet.

It's the new application platform. That's what people are calling Web 3. And they're going to be building all kinds of applications, not just financial service applications. So we believe Coinbase is the best-positioned company in the world to help drive that change.

And our goal is really to be the primary account where people access crypto economy and Web 3. And we have this really great customer base and brand and infrastructure that all nicely integrates and we can make crypto easy and trusted and safe to use. So with that, Alesia, let me turn it over to you to give a bit more detail on our 2021 results and the outlook for 2022.

Alesia Haas -- Chief Financial Officer

Thanks, Brian. So we put a lot of detail into our shareholder letter. And so I encourage you all to read it, but I want to call out a few highlights. As Brian shared, we had a lot of great wins in 2021.

First of all, I want to call out is we expanded our trading volume market share. Our trading volumes increased 8.5x versus 2020, and this was higher growth than crypto spot markets, which grew at 7.5x. This means that our trading volume market share increased in virtually every asset that we support on our platform. Second, we made significant progress at diversifying our revenues, and we significantly increased our revenues.

Our 2021 transaction revenue increased more than six times year over year to $6.8 billion, including $2.3 billion in Q4. And our emerging revenue streams, which we call our subscription and services revenues, became more significant. We generated more than $500 million of subscription and services revenues this year, including $214 million in the fourth quarter. This is a 10 times increase from 2020.

And importantly, this now comprised 7% of our net revenue in 2021, up from 4% in 2020. We're anticipating massive industry growth to continue over the long term, and this really informs the backdrop of our 2022 investment plan. So switching gears and turning more toward our outlook, I'm going to start with Q1. So we noted in our letter that Q1 is trending softer than Q4, and this is driven by lower crypto asset prices and lower volatility than we saw last quarter, both of which were significantly correlated with our monthly transacting users and our trading volumes.

Quarter to date, our retail MTUs have averaged roughly $10 million. On our trading volume, quarter to date, we've seen approximately $200 billion. And so we expect Q1 to have lower MTUs and lower trading volume than Q4 of 2021. In terms of subscription and services revenues, we do anticipate the price effects, i.e.

lower crypto prices will drive lower revenue in Q1 as compared to Q4. But we're excited about the prospect of this revenue stream nonetheless and continue to build new products and grow our native unit on our platform. On the expense side, we're anticipating transaction expenses to be in the low to mid-20s, driven primarily by the growth of blockchain rewards revenue. And our operating expenses, excluding other expenses, and there's more detail about this in the letter, will be in the range of $1.2 billion to $1.3 billion.

Turning to full-year 2022, I want to start with we are very difficult to forecast our business, and we're entering this year with more unknowns, which make it even more difficult to forecast than what I would have said last year. And so it is too early in the year to take a very precise view. This informs our approach where we said we would be transparent with you all, but we've provided for an average annual retail MTU range that spans from 5 million to 15 million for 2022. And importantly, we are prepared to manage our business through either end of this range, through any of the outcomes and permutations in between.

Our 2022 expense outlook reflects an ambitious headcount growth plan to build the product experiences and infrastructure, to drive user adoption higher throughout the world through increased marketing investments and international expansion. And as Brian alluded to earlier, we are really excited about the options ahead of us. Given this wide range of MTUs of 5 million to 15 million, which could, in turn, drive a wide range of revenue outcomes, I wanted to provide some more color on what you might expect. If we perform to the middle of the high end of this range, we expect to be profitable.

If we perform on the low end of this range, we plan to manage our business such that our adjusted EBITDA loss would be no more than $500 million. Against our $7 billion of cash that we ended the year with, we think this is a very manageable loss if we choose to take it because the investment for the long term is the most important thing we can do because we're in the early days of crypto. So notwithstanding short-term lack of predictability, we're so excited about the progress we made in 2021 and our plans for building out further this year. With that, I'll turn it to Anil and we can take some questions.

Anil Gupta -- Vice President, Investor Relations

Sounds good. So before getting into Q&A, I wanted to clearly lay out some principles for our Q&A session today similar to last quarter. First, we will answer the most uploaded questions determined by the number of shares, and we may group some questions together that touch on the same themes. Second, we don't plan on answering questions related to the potential listing of new assets.

And third, we will avoid answering questions that we've done so in the past if there are no updates. For example, we still do not plan to issue a dividend. So with that, we'll go to the first question. The first question comes from several users, including Akash S., who expressed concern about our share price performance recently and since Coinbase went public.

How can we add some context from investors about our share price performance to date?

Alesia Haas -- Chief Financial Officer

Thank you, Akash, for the question. And I think this is something a lot of investors have questions about. I'm glad you gave us the opportunity to respond. I'm going to answer in two ways.

So let's start with the textbook answer. There are a number of factors at play with regards to the COIN stock price right now. First, there's been a significant sell-off in the market since the November FOMC for many high-growth companies, and Coinbase is no exception. This is driven by broad macroeconomic factors at play, inflation, interest rate concerns, and geopolitical tension that we, unfortunately, saw in the headlines this morning.

So beyond macro factors, we've also observed that our stock has been highly correlated with crypto prices, which are down roughly 20% year to date. We honestly don't truly understand this as this correlation does not take into account the growth in our market share that I spoke about previously, the diversification of our business beyond investing, and let alone the future potential of our business as we expand into new assets and new product streams. We're focused on building toward revenue diversification, and we think this trend will be decoupled over time. But that is a little bit of what's impacting our stock at this moment.

The non-textbook answer now, when I look at the market today, I cannot help but reflect back on prior risk-off markets where we saw investors move capital out of risk assets. And those historic windows honestly were the best times to invest in my lifetime. So when I look at the crypto market today and we see the innovation, the diversification, the growth sectors, there's just so much to be excited about, and I'm really optimistic about the opportunities to enter crypto-asset investments at these price levels. In fact, we just increased our own corporate crypto investment by nearly $350 million in the last few weeks.

Brian, do you want to add anything here before I go on?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I think that was a great answer. I mean, look, I'm in the same boat. I have to scratch my head a little bit looking at some of the revenue multiples.

And I think we're very bullish about the future. I think it's really rare to see a company that has high growth, profitability, and a massive TAM in front of it. That's kind of the trifecta. And it's really hard for me to imagine an industry that has more growth potential in front of it if I look at the next decade.

And so look, I think a lot of this is just human psychology. I think even just a few months ago, there were people I saw lamenting, like, oh, I wish I had bought crypto sooner or COIN stock sooner, and they didn't think they would ever get a chance to buy something like at these prices again. And then, of course, by some stroke of luck when that opportunity does arise, that now they may feel pessimistic or something on it. So I think it's just human psychology.

Like Alesia said, this is kind of when fortunes are made if people -- some are greedy when others are fearful. But honestly, I think we try to ignore this stuff. I think a lot of it is just short-term effects that are macro things happening out there in the world. And 95% of our efforts should just be on building great products that help our customers and help grow this industry.

And I think the next 10 years are going to be great. So we really try not to think about it too much and just have a long-term view.

Alesia Haas -- Chief Financial Officer

I just want to reinforce that point. I think one of the questions is, what are we doing about this? And first, I just think we are in good company as, I think, many companies are asking this question of themselves right now, watching the stock price declines over the last few months. But crypto has prepared us well for volatility. And as Brian said, we've learned to focus on what is in our control.

And for us, that means building safe, trusted, and easy-to-use products for our customers, investing in innovation, and trying to clearly articulate our story and our business value to our employees and to you, our investors. And we believe if we continue to focus on these basic principles, that will drive our long-term business success and the stock price will take care of itself.

Anil Gupta -- Vice President, Investor Relations

All right. Our next question comes from Milton M. and Jeff C., who are both focused on our revenue mix. What avenues of revenue are we exploring beyond trading? And do we have any ambitions to help businesses with NFTs, for example? And will diversification of revenue help decouple the share price from the price of crypto assets?

Alesia Haas -- Chief Financial Officer

Great questions, Milton and Jeff. A little to unpack here. So you are right that the transaction revenue has historically made up the lion's share of our revenue. But as I shared in my comments earlier, we're taking steps to diversify this revenue and also grow our non-transaction revenue stream.

One of the big takeaways of last year was the increasing amount of utility in the crypto economy beyond investing, and the growth of the subscription and services I spoke about earlier reflects this, we saw 10x growth year over year. We have 3.6 million users earning yield on their assets at year end, which is more than five times the number that we're doing in 2020. A lot of these users are staking their assets, many of them last year. And so we plan to open up assets like ETH for institutions later this year, and we also plan to add more assets, more proof-of-stake chains for users to participate in.

Beyond that, we're really excited to launch our NFT platform. We view this as a very large addressable market with new and existing users who are clamoring for a different NFT experience, a simpler NFT experience. It still tends to be a little bit complex. And what we like right now while we're observing the market is that NFT volume and price appear less correlated with other crypto assets.

And so you're seeing new crypto projects that have less correlation and it's just that general theme of diversification, whether NFTs fall to our transaction revenue or not, you're going to see different trends that will lead to a more sticky revenue stream with time. And I commented on this earlier, but as far as share price goes, it's difficult to predict the future but we do hope to see that investors recognize that we are a diversified platform and will start to see our price decouple from overall crypto rising prices. Anil, back to you.

Anil Gupta -- Vice President, Investor Relations

Great. Next question comes from Tom W., who asked about the timing of the ability to trade ETH2.

Emilie Choi -- President and Chief Operating Officer

Great. Thanks for the question, Tom. Generally, we don't comment on the listing of new assets, but this is a unique case because we already list ETH and then we allow staking for ETH2. Trading of ETH2 is dependent on the merge, which is going to combine the original Ethereum blockchain, which is proof of work, with the ETH2 chain, which is proof of stake.

The timing of this merge is out of our control, and it will be driven by the Ethereum community, but we expect to see it at some point later this year. And we think this is a really exciting event for the crypto community and are working to support our customers before and after the merge. We recognize that customers are seeking liquidity on their ETH2, and we're working on solutions to provide this such as a raft ETH token in advance of the merge. And we believe that once ETH2 has liquidity available, it is going to drive more demand for ETH2 staking.

We're also working to extend this capability to institutional clients for the first time later this year.

Anil Gupta -- Vice President, Investor Relations

Thank you, Emilie. Next question comes from Gerardo D., who asks if there's a road map for Coinbase to support traditional security, such as stocks.

Alesia Haas -- Chief Financial Officer

Not at the time. Over the long term, our view is that everything will eventually migrate to blockchain technology, so we'll see security tokens as an example. And we're excited to support those in the future. We're investing in the infrastructure to power that future, but we do not see that as a near-term road map item.

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. Just to add to that, I think there's so much greenfield opportunity in front of us with the crypto economy and Web 3. And frankly, we've got our hands full, I think, just trying to keep up with all the various opportunities emerging there. So to me, it would be a little bit of a step backward to try to launch maybe a traditional brokerage or something like that.

I think there are many good companies out there already serving that use case. So I would rather lean into the future and kind of build to where things are going.

Anil Gupta -- Vice President, Investor Relations

Great. Next question comes from Kyle R., who asked about how we plan to beat OpenSea for the NFT market share.

Emilie Choi -- President and Chief Operating Officer

Yes, this is an important question. So clearly, there's a significant and growing amount of volume across NFT marketplaces today, but the industry is still so nascent that we see a lot of opportunity for innovation. We definitely don't believe that this is a zero-sum game. We're huge fans of OpenSea.

And in fact, we've been investors in their platform as members of Coinbase ventures. And we're always going to ultimately as Coinbase double down on the value props that got us to the place we're in today, which are based on ease of use, trust, and safety. For our own NFT marketplace, we're also focused on a social experience, building a community. So the person who is architecting this came from Instagram and had social roots, exclusive content and partnerships, and then distribution.

So today, people can buy on Coinbase, transfer to a wallet and then go to the marketplace. If they can do that all in one app with a few clicks, that's a win, and it feeds into the ease of use that we think we're quite good at. Brian, anything to add to that?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I mean I agree with that 100%. I think, look, it's not really about beating OpenSea. I think this is a new market.

There are going to be a lot of winners. Oftentimes, if you put out a product and another product looks similar in the early days, they tend to diverge over time and find their own niches after at some point. So I think just generally, we're really bullish on NFTs. It's going to be much larger than just digital artwork or something, which a lot of people are thinking of it as there's going to be all kinds of in-game items in the metaverse.

There's domain name and like ENS name-type assets that are being created out there. There's citizenship and governance and like various novel fundraising mechanisms. So this segment is going to be really big and we're -- it's so early. I think it's not really about beating any of the other smaller players or -- we're a small player today too.

So I think it's all about building the future. How do we a hundred exercise with the opportunity?

Anil Gupta -- Vice President, Investor Relations

Our next question comes from Ashwin N., who asked when Coinbase will release infrastructure and tooling for building like AWS for crypto? And similarly, John D. asked how our offering and market share stack up to services like Alchemy and Infura?

Emilie Choi -- President and Chief Operating Officer

Great question. So just for context, in many cases, we are offering APIs and tools that we initially built to use for our own products. And we're competing by offering tools that can operate at a significant scale. And this, in many ways, mimics the path of AWS.

So Coinbase Cloud is our product suite to provide infrastructure and tools for Web 3 builders and other companies to accelerate building their own crypto products. And we see strong adoption of our staking services, which has reached tens of billions in assets staked across 25 protocols. We now support more than 60,000 nodes for participate, delegate, query, and transacting products. And in Q4, we launched a prime API, which augments and unifies existing services for staking, exchange, commerce, and other products.

We're definitely in the early days, and we see meaningful opportunities to expand our suite of developer-focused products. And then to comment on the competition in our product offerings, as I shared earlier when we talked about NFTs, we don't believe this is a zero-sum game. In fact, Coinbase Ventures was an early investor in Alchemy. So we think that this is an area that's ripe for development and growth and, again, are at the beginning of the kind of trajectory of that.

Brian, anything to add to that?

Brian Armstrong -- Co-Founder and Chief Executive Officer

No, I think that's right. I mean the question really asked about when will we release these infrastructure and developer tools. And I think what you're hearing is some of those are already live today, and there's a lot more we're going to add in the future.

Anil Gupta -- Vice President, Investor Relations

Next question is from John D., who asked about our progress internationally. He called out Singapore and Japan specifically, noting that it feels like Coinbase is behind. Any thoughts here to share?

Emilie Choi -- President and Chief Operating Officer

Thanks, John, for the question. I think it's a valid observation. At the same time, we weren't first movers in these markets, and our strategy is not necessarily to be the first to launch in every market, but we want to be the first to do it right. Now that said, global expansion is a top priority for us as a company.

Historically, we've built products for U.S. first, international second. And now we are transitioning to a new model and mindset where we ship products globally by default. We made a big hire this past quarter by hiring Nana Murugesan.

He is the VP of international operations and business development. Last week, we did a blog post about lighting up the map, which is a new two-pronged approach to how we are going to go after global expansion. So one is going broad. We're going to launch foundational products that are a gateway to Web 3 and crypto in every country.

And then also, we're going deep. So we're going to launch localized infrastructure and public-facing products with a full suite of services. Specifically, with respect to your question on Singapore and Japan, we have started to build local teams. We've hired our local country directors based in Singapore and Japan.

We have set up engineering hubs in APAC to help localize our products for the region. And in Japan, we've made good progress working with regulators and have secured our license. We launched an early version of our retail product, and now we're in the testing phase. We've built a strong early foundation.

We were the only crypto player to provide a banking rail with the nation's largest bank, MUFG. And in Singapore, we're focusing on institutional and are already seeing substantial interest in adoption. Our Singapore team is also focused on developing a large retail opportunity in Indonesia, Philippines, and the broader Southeast Asia region. So we have a long-term strategy in place and winning markets takes time.

We expect it's going to take several years to build a market-leading position across the markets in the Americas, EMEA, and APAC, just like we've done in our U.S. and European businesses. Brian, anything to add?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I mean I'm glad you asked about international expansion. It's definitely something I'm really passionate about. If you just go back to our mission about increasing economic freedom, a lot of places in the world, certainly outside of the U.S., have major challenges around economic freedom.

And that's something that we feel like crypto is this incredible invention that can be creating this new more global, more free, more fair financial system for the world. So international expansion is a big priority for us. You're going to see us -- it's really a two-pronged approach because if you're going to large markets that have -- as a regulated financial service business like we're doing in Japan, you're going to see that move slower because it's a lot about getting the right licenses and the right bank partners and localizing the product. And that's a country-by-country kind of slower approach, but it's great when you can land it.

When you want -- if you want to go for more of a self-custodial wallet or that product can be distributed globally quicker, you don't have to go country by country. It's more of a software product. And so we're seeing that product do well in some emerging markets. And so I think we're going to have our custodial products do well in regulated markets.

We're going to have -- like major markets, we're going to have our self-custodial wallet do better in a bunch of emerging markets. And I think we'll get a lot of global coverage out of that two-pronged approach. So glad that we're getting more and more people in crypto on the platform globally. And I think from an economic freedom point of view, a lot of barriers happen when people try to do remittance and FX and things like that.

And so that's kind of the dream. That's the vision behind crypto generally is how can the world have one decentralized global transnational financial system that's more efficient, more fair, and more free.

Anil Gupta -- Vice President, Investor Relations

Great. So we'll take two more questions before opening up to the analysts. The next one comes from Jason K. and John D., who both observed that many competing platforms are offering attractive yields on assets through staking or lending.

So what are Coinbase's plans to offer yield-generating products? And is Coinbase facing more regulatory scrutiny around these features? Or is it simply just not a priority right now?

Alesia Haas -- Chief Financial Officer

Thank you for this question. I'll take this one. So yes, yield products are one of the top requested products by our customers. And today, we do offer staking products, which are compelling yield-generation opportunities.

We drove more than $200 million of blockchain rewards this year, which is really rooted largely in our staking revenues as we added a number of proof-of-stake assets, notably ETH2 in mid-2021. We hope to support more users to generate rewards from many more proof-of-stake assets this year, and we'll be looking to make that a large growth area for our customers and for our revenue stream. You're right to know that yield products are also a significant area of focus by regulators. So there was some noise earlier this year about a lend product that we had in the market that we've talked about on prior calls.

And we have always taken the approach to embrace regulation and think of it as a thoughtful way we've done. It is a business enabler. So we've seen recent actions in the market that have taken both to the state and federal level to curtail certain products that offer yield. But there appears now to be a path to registration as a result of some of the recent enforcement actions.

And so we will see how that plays out. But our objective is to continue to offer more and more choices to consumers and institutions as we possibly can while remaining compliant with regulations in each market that we operate in.

Anil Gupta -- Vice President, Investor Relations

All right. So the last question we'll take from Say today before going to the analysts is from Scott W., who asked a great question. He's curious about DAOs. How do DAOs figure into the Coinbase product road map for retail and institutional users?

Emilie Choi -- President and Chief Operating Officer

Thanks for the question, Scott. Let me start by quickly defining a DAO. A DAO is a decentralized autonomous organization, and it's currently being used as a catch-all term that describes the broad range of emerging organizations that are powered by crypto at their core. It's one of the more exciting ideas in the crypto community right now.

These range from investment DAOs that buy assets to social DAOs that create communities to protocol DAOs that manage the infrastructure of the crypto economy. And DAOs unlock new ways of working that weren't previously possible, and they offer the potential to improve organizational efficiency. This is an innovation that could disrupt the long-established business norms of organizing via C Corps and LLCs. So taking a step back, for Coinbase, we're building a platform to create trusted, easy-to-use crypto experiences for customers across their entire crypto journey.

And this would include developers who are creating DAOs or users transacting with DAOs. We're making some early investments here and building the picks and shovels for DAOs that can help them succeed. And our initial focus is unlocking existing products, like Coinbase Cloud and Prime to serve this new segment. Over time, we hope to better explore these innovations and to expand our products to meet the evolving needs of our customers, but it's very early days.

Brian, anything on DAOs that you want to add?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I mean we think DAOs are very exciting. I think it's potentially the Delaware C Corp of the crypto economy, right? And I think in terms of what products we can offer to our retail and institutional users, yes, I mean it's -- we would follow the same approach that we do with all of our products, which is how do we make it the most trusted and the easiest to use. And so you can imagine many scenarios where a retail user or a business institution wants to go create a DAO. We could help them do that.

We could help them provide ancillary services to participants in the DAO, like around how to conduct votes and how people submit the puzzles and maybe how payroll happens on the DAO, taxes, like you name it. So I think there's going to be a lot of opportunities to help people create DAO and to manage them. And yes, we'd love to build that out.

Anil Gupta -- Vice President, Investor Relations

Great. OK, so with that, we'll switch and take a few live questions from our analysts. Mel, I will turn it over to you for the first question, please.

Questions & Answers:

Operator

Thank you, sir. Your first question comes from the line of Ken Worthington of J.P. Morgan. Your line is now open.

You may ask your question.

Ken Worthington -- J.P. Morgan -- Analyst

Hi, good evening. Thank you for taking my question. Coinbase's plans are ambitious and the increase in investment spending guidance is significant compared to the fourth quarter run rate. I guess can you help us feel more comfortable with your comments that the pace of investment could, in fact, drive Coinbase to be unprofitable in 2022? Help us feel confident in the investments you're making in the new products, new services, and new geographies that are driving the G&A and technology costs so much higher.

And how much of the 2022 investments that you're making could actually result in higher 2022 revenue versus the investments you're making today that are going to benefit the business over the next 5 to 10 years?

Alesia Haas -- Chief Financial Officer

Allow me to make a start at this and then, Brian and Emilie, feel free to add on. So Ken, just to unpack that a little bit, yes, '22 is an investment year. As we shared in our outlook, it's too early to call with precision where we think the revenue or the MTUs of 2022 will land, which is why we give a range of 5 million to 15 million. As I said in my earlier remarks before in the midpoint or the high end of that range, we'll continue to be profitable.

But there is a scenario where if we're at the low end of that range, we are prepared to drive a loss of up to $500 million loss in adjusted EBITDA. We believe that many of the investments that we're making this year are going to the products that we articulated and are looking ahead. The investments that we're making in our investment platform, for example, of adding new assets, adding payment rails, those we expect to impact our 2022 revenue as we've seen the continued diversification of assets on our platform contribute very near term to the revenue that we've been able to generate, for example, in 2021, where we saw more revenue come from the long tail of crypto than from Bitcoin and Ethereum. Other investments that we're making, for example, in the DAP platform and NFTs, I think that that's going to not have as material of an impact in 2022, and those are more long-term bets that we think will have significant impact on the longer-term revenues of our company, similar with international.

It will take us, as Emilie said earlier, quarters or years to see those investments turn into meaningful revenue streams. So we think they're the right long-term investments to make. Last, we're putting a lot of effort into just increasing the reliability, the stability, and the infrastructure on our platform. As Brian shared in his comments earlier, the volume pickup from 2020 to 2021 was extraordinary.

And sort of you don't see these moments very often in your business career where you have 5x, 10x kind of volume multiples on your users, on your volume, on your platform. And what we've seen in crypto is that you do see those step functions of the growth. And so we want to make sure that we can offer great experiences to our customers and meet the volume that is coming to our platform and that requires investments in infrastructure. So it's investing in near-term revenue opportunities for long term as well as infrastructure is how we would bucket that investment.

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I think that was great. And you reminding me of just when we did the direct listing, I think we were -- we've repeated that message a handful of times that we're going to continue to invest through up and down cycles. But roughly, we feel like we're so early in this stage of this industry.

We roughly want to operate the business at breakeven, smoothed out over multiple years if there are up and down cycles. So far, we've been profitable every quarter as a public company. But we just want to repeat that message again that we're going to continue to invest through up and down cycles because it's the early days. We're investing for the long term.

So hopefully, that gives good context on our thinking.

Ken Worthington -- J.P. Morgan -- Analyst

Great. Thank you very much.

Operator

Thank you. The next question comes from the line of Will Nance of Goldman Sachs. Your line is now open. You may ask your question.

Will Nance -- Goldman Sachs -- Analyst

Hey, guys. Thank you for taking the question. I wanted to ask, I guess, another question on investment spending. You've seen a lot of the competitors with the large crypto changes make pretty significant investments in kind of brand advertising, stadiums, things like that.

Everyone was at the Super Bowl this year. And I guess when you look at the competitive environment and the amount that your competitors are spending on maybe the less visible things that we can see from the outside, how much of the investment that you're making this year would you say is a response? Are you guys trying to keep up with the market? Or do you guys feel like you're pulling ahead of the market in terms of the amount of money that you're spending on the ecosystem?

Emilie Choi -- President and Chief Operating Officer

Thanks, Will, for the question. I'll try to tackle this and, Alesia, Brian, please add on. So I think that we are going to probably just take a different approach to the way that we do marketing. And for us, we want to do things in an authentic way that we feel is representative of Coinbase and Web 3.

Historically, we had a lot of organic growth, and then we started experimenting with high ROI paid acquisition and saw great success with that. And we continue to build on top of that with great product marketing and then you saw our Super Bowl ad. In general, we like to be a very ROI-driven company. And so to that end, the marketing efforts that we embark upon are going to be very kind of quantitative measure as with the Super Bowl ad.

I think that's one of the first Super Bowl ads that ever was kind of in that direct response mold. So we're going to do things that are natural to Coinbase. We're going to do things that we think are differentiated to Coinbase. And we feel like that's the only way for us to operate.

Brian, Alesia, anything else to add on that?

Brian Armstrong -- Co-Founder and Chief Executive Officer

Not too much to add. I think you nailed it. I mean we -- I think the number one thing we're focused on is building great products. And then we're at a scale now with a number of users and brand awareness, but I do think it makes sense to invest in marketing.

But you're probably going to see us do it a little differently than other crypto companies. We want to do something that's more authentic to us. We want to be rigorous about it, as Emilie mentioned. And I think we have an opportunity to kind of go tell the world more about the vision for the company, the mission for the company, what we're all about, why are we doing this, why do we think this is good for the world, with kind of brand campaigns.

We have an opportunity to do -- just talk about the products with great product marketing and performance marketing. And we might do some -- just create kind of fun stuff up too that's creative. But you're not going to see us probably do really -- I don't know what you'd call the rest of it, but it's going to look a little different. So Alesia, anything you want to add?

Alesia Haas -- Chief Financial Officer

I think you guys have nailed the marketing spend. The only other comment, Will, I thought I heard a little on your question about how much of our spend is doing things to catch up to what others are doing versus staying true to our own road map. And I think most of us are kind of staying true to our own road map, and that's beyond marketing. But that's also in -- we want to offer products to our customers that we see customer demand for.

So we're not always going to be the first to market with a product. But once we see customer demand, we're going to fast follow and make sure that we can leverage the strength of our platform, which is distribution, which is the security and trusted nature of the products we built to tack on more and more product experiences to create a better experience for customers.

Will Nance -- Goldman Sachs -- Analyst

Got it. Really helpful. Thanks, everyone. And then just maybe as a follow-up, if I could just ask a little bit more about the institutional business.

From a revenue contribution, it's relatively small today. But obviously, I think that kind of understates the scale of the business. When you think about new product initiatives for the institutional side, do you guys envision a scenario where the institutional business can contribute a much larger share of the revenues over time? And I'm thinking specifically about product initiatives around derivatives and client financing. I think you made a couple of moves recently in terms of acquisitions and licensing around derivatives.

How significant do you think that could be? And could we be looking at a step function in institutional revenues at some point when those things come online?

Emilie Choi -- President and Chief Operating Officer

I can -- sorry, go ahead, Brian.

Brian Armstrong -- Co-Founder and Chief Executive Officer

We're very excited about institutional as well. I think it's got a ton of potential. And there are some synergies there with retail and institutional. So it's -- I expect it to grow quite a bit over time.

But yes, Emilie, go ahead, then Alesia. We've got lots of thoughts.

Emilie Choi -- President and Chief Operating Officer

Sure. I think the plan is for our entire business to grow and institutional will grow as a part of that, and we think it's going to be a large part of it. I think what the contribution is going to be over time is still TBD, but remember that we only kind of began building this about two years ago and it's already showing such promise and legs. I think the cool thing about the institutional business is that there's a bit of a road map in terms of what you've seen in the traditional institutional world.

And so our team who's building this can kind of look to that and see the products that existed in the traditional world and say, how can we envision that in a crypto-oriented world? And to your point, Will, things like financing and other products that are just loved by institutions, including derivatives, are areas that are just no-brainers, and that's why we're making big investments. Alesia, anything to add on that?

Alesia Haas -- Chief Financial Officer

I think in the interest of time, we can go to the next question.

Will Nance -- Goldman Sachs -- Analyst

Awesome. Well, thanks for taking the questions today.

Operator

Thank you. And next question comes from the line of Rich Repetto of Piper Sandler. Your line is now open. You may ask your question.

Rich Repetto -- Piper Sandler -- Analyst

Yes. Good evening, Brian and Alesia and Emilie. And this sort of goes back to an earlier question when you talked, Alesia, about near-term investments in moderate term and long term. But it does seem like you have a lot of opportunities that Brian has laid out in the strategy section of the pillars.

So I guess could you help us at least identify some of the shorter-term things that we could see that could actually contribute to revenues on the shorter-term basis?

Alesia Haas -- Chief Financial Officer

Sure. Thanks for the question, Rich. So as Brian also shared earlier, one of the things that we look at is a 70-20-10 model where 70% of the investment goes to our core, 20% to adjacencies, and 10% to ventures. That maps somewhat closely also to the way that we think about our pillars of our strategy where the bulk of our investment is still going into the investment platform, adding assets, adding payment rails, going global, adding marketing, and a lot of innovation there.

And then the ventures is more of the 10% side, which is the newer, newer products. So when we think of that, I think you'll see a lot of growth in the near term, as we expect to see a lot of growth from existing subscriptions and services. Staking is going to see a lot of growth. We're adding institutional access to ETH2 this year.

We're adding new staking protocols, and we see a lot of user interest in the yields generated by staking at the Coinbase app. So I expect that as more near-term-type revenue. And I think that we're excited about the potential of NFT and derivatives. These are going to take a while to get right and to add meaningfully to our revenue.

There could be some surprises quite candidly, but I want to be more cautious of when we see that coming into our revenue this year.

Rich Repetto -- Piper Sandler -- Analyst

Got it. Very helpful. And Brian, just one follow-up question. Emilie mentioned that you do have -- I think she mentioned you had an investment in OpenSea.

And I'm just trying to understand the strategy and philosophy in the venture investments, like the purpose. And I think they just raised money at a pretty good valuation. Would you look at -- is there an exit strategy for those types of investments like OpenSea?

Brian Armstrong -- Co-Founder and Chief Executive Officer

You cut out for the first part of the question, but I think the question was about ventures and what is the exit strategy. I mean our plan is to hold those. I mean, again, we feel it's very early days. And so I expect Coinbase Ventures will turn out to be incredibly valuable over time.

We're not planning to try to liquidate anything there in the short term. Emilie, anything you want to add?

Emilie Choi -- President and Chief Operating Officer

Well, Rich, we were actually in the seed round of Open Sea. So one of the things -- like the way that we think about the goal here is it's an incredible way for us to stay close to the ecosystem, see what's popping, get great differentiated insights, build relationships in the crypto ecosystem that potentially lead to M&A, as we did with Bison Trails. And then ROI and IRR are more of third criteria and yet, at the same time, the returns have been quite impressive. And so it's a really nice side benefit.

So again, we're holders of all these assets. We think they're going to be quite valuable.

Anil Gupta -- Vice President, Investor Relations

Mel, I think we have time for one last question, please.

Operator

All right. Thank you. And our final question comes on the line of Lisa Ellis of MoffettNathanson. Your line is now open.

You may ask your question.

Lisa Ellis -- MoffettNathanson -- Analyst

Terrific. Thank you. Thanks for squeezing me in. I had a question about the competitive environments in the U.S.

market where some of the global players have been investing more heavily in their U.S. subsidiaries. Can you just help crystallize for us how Coinbase shines or differentiates itself relative to the handful or so of other crypto-native brokerage and exchanges operating in the U.S.? Thank you.

Brian Armstrong -- Co-Founder and Chief Executive Officer

Yes. I can take that quickly. So far, we haven't seen meaningful volume from, I guess, foreign exchanges that are now trying to enter the U.S. But I think we have to be mindful of it.

You can think of it as Coinbase really has the opposite challenge, which is we started in the U.S. We're very -- we're doing really well there, but we've increasingly turned our attention to international. So I think, look, the way we've differentiated over time is we've leaned into regulation. We've sought to be the most trusted player in the space, whether that comes to cybersecurity or legal efforts and that kind of thing.

And then we've tried to make crypto easier to use as well. So we're not trying to make a product for super technical people or super professional, super pro traders or whatever. We're trying to make a product for everybody. And actually, I think even technical people and pro traders prefer interfaces that are easy to use.

And so being the most trusted, being easiest to use, that's the way we've differentiated over time. Emilie, Alesia, anything would you want to add?

Emilie Choi -- President and Chief Operating Officer

I agree.

Alesia Haas -- Chief Financial Officer

Same.

Anil Gupta -- Vice President, Investor Relations

OK. Well, that does it for today. Thank you everybody for joining us on our call today, and we look forward to speaking with you on our next call.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Anil Gupta -- Vice President, Investor Relations

Brian Armstrong -- Co-Founder and Chief Executive Officer

Alesia Haas -- Chief Financial Officer

Emilie Choi -- President and Chief Operating Officer

Ken Worthington -- J.P. Morgan -- Analyst

Will Nance -- Goldman Sachs -- Analyst

Rich Repetto -- Piper Sandler -- Analyst

Lisa Ellis -- MoffettNathanson -- Analyst

More COIN analysis

All earnings call transcripts