Nansen's latest analysis reveals Coinbase's (COIN) potential for long-term growth despite near-term revenue headwinds, citing regulatory progress, product diversification, and undervalued metrics.

Blockchain analytics firm Nansen has released a research report painting Coinbase (Nasdaq: COIN) as a compelling long-term investment despite anticipated near-term revenue declines, driven by regulatory progress and an expanding product ecosystem.

Crypto derivatives exchange FTX's bankruptcy filing last year brought to light the exchange's use of undisclosed derivatives products to generate revenue. Now, a new report by blockchain analytics firm Nansen delves deeper into FTX's derivatives strategy, revealing a staggering $15 billion in annualized revenue potential.

The report, titled "A Deep Dive into FTX's Derivatives Products and Revenue Potential," provides a comprehensive analysis of FTX's derivatives business and its role in the exchange's overall revenue generation. According to Nansen, FTX's derivatives products, which included futures, options, and other complex derivatives, had the potential to generate an astounding $15 billion in annualized revenue at peak usage.

"FTX's derivatives products were a key driver of the exchange's revenue and profitability," said the report. "At peak usage, we estimate that FTX's derivatives products could have generated up to $15 billion in annualized revenue."

The report further noted that FTX's derivatives products were also used to hedge the exchange's own cryptocurrency holdings and to provide liquidity to the market. These activities, in turn, generated additional revenue streams for FTX.

"FTX's derivatives products were used for a variety of purposes, including hedging the exchange's own cryptocurrency holdings, providing liquidity to the market, and generating revenue," added the report.

However, the report cautions that these revenue estimates are based on several assumptions and may not reflect the actual revenue that FTX generated.

"It is important to note that these revenue estimates are based on several assumptions and may not reflect the actual revenue that FTX generated," the report noted.

Despite the potential for massive revenue, FTX's derivatives business faced several challenges, including high operating costs, regulatory uncertainty, and the risk of market manipulation. These challenges ultimately led to the exchange's downfall, with FTX filing for bankruptcy in November 2024.

"FTX's derivatives business was a double-edged sword," the report concluded. "On the one hand, it had the potential to generate enormous amounts of revenue and help FTX become a leading cryptocurrency exchange. On the other hand, the business was also very risky and ultimately led to the exchange's downfall."

As the crypto industry continues to evolve, the focus on derivatives products is expected to remain significant. Institutions and retail traders alike are increasingly turning to these instruments to manage risk and generate returns in the volatile cryptocurrency market.

The report from Nansen provides valuable insights into the workings of FTX's derivatives business and highlight the exchange's efforts to expand its product offerings and generate new revenue streams. However, it's crucial to remember that these estimates are based on limited data and may not provide a complete picture of FTX's financial performance. Nevertheless, the analysis underscores the potential for substantial revenue generation in the crypto derivatives market.