Following Coinbase’s (COIN) first-quarter earnings miss and the announcement of its $2.9 billion acquisition, Wall Street analysts have offered a mix of opinions, with some lowering their near-term expectations and others pointing to the company’s strong long-term strategy.

“Q1 results came in slightly below expectations, and the guidance for subscription and service revenues, as well as April transaction volumes, was affected by weaker crypto markets and changes in rebates/mix,” noted Benjamin Buddish from Barclays, who maintained an “equal weight” rating on the stock. “Despite this, Coinbase gained significant market share in both spot and futures trading during Q1, and its outlook remains positive.”

Coinbase reported a 12% quarter-over-quarter revenue decline to $2.03 billion, falling short of analyst forecasts. Transaction revenue took the biggest hit, dropping nearly 19% to $1.3 billion, raising concerns about the near-term outlook. As a result, several analysts, including those at Keefe, Bruyette & Woods and JPMorgan, downgraded their revenue projections for the second quarter and the full year, citing lower fee rates and reduced institutional trading volumes.

While retail trading remained steady, institutional revenue saw a notable decrease. JPMorgan highlighted a 30% quarter-over-quarter decline in institutional volume and a drop in institutional fees from 4.1 to 3.1 basis points, driven by a mix of incentives and rebates and a rise in high-frequency trading.

On the other hand, Coinbase’s $2.9 billion purchase of Deribit, the world’s leading crypto derivatives exchange, stood out as a strategic move. The acquisition, expected to close by the end of the year, received positive attention from analysts like Bernstein, which issued an outperform rating, praising the valuation given Deribit’s $1.2 trillion annual trading volume and $30 billion in open interest. Canaccord Genuity also gave a buy rating, suggesting that the acquisition would bolster Coinbase’s global position and potentially smooth the path to U.S. regulatory approval for crypto options.

Despite the dip in trading revenue, Coinbase’s other revenue streams showed growth. Subscription and services revenue rose by 9% to $698 million, primarily due to an increase in stablecoin adoption. USDC balances on the platform surged by nearly 50% to $12.3 billion, with off-platform balances climbing 39% to $42 billion. Canaccord pointed out that average balances per user had tripled since June 2023, signaling strong growth in non-transactional revenue.

Coinbase is also expanding its “Coinbase as a Service” model, which offers white-label infrastructure solutions to institutional players entering the crypto market. Analysts at Canaccord believe that this could become a significant revenue source, helping to mitigate the volatility of trading revenue and further cement Coinbase’s leadership in the market.

“We’ve seen increasing interest from both traditional financial firms (TradFi) and crypto-native players in using a ‘buy vs. build’ strategy as the industry matures,” Canaccord analysts stated. “Revenue from such infrastructure services would help smooth out the variability in trading cycles while strengthening Coinbase’s position in the space.”

Macroeconomic factors were also a point of concern. Analysts at Oppenheimer (outperform) and Barclays noted that weak market sentiment and tariff-related uncertainty were likely contributing to the drop in trading volumes in April and May. Additionally, the failure of the GENIUS Act, a stablecoin-focused bill in the Senate, added to the regulatory uncertainty. Despite these challenges, JPMorgan remains optimistic, believing that progress on crypto regulation could pick up again before the August recess.

Overall, Coinbase continues to position itself as a central player in the crypto ecosystem. While the immediate outlook faces challenges like low volumes and reduced fees, many analysts remain confident that Coinbase’s expanding product offering, strong U.S. market presence, and strategic moves like the Deribit acquisition will set the company up for long-term success.

As Canaccord put it, Coinbase remains the “gold standard” for both institutional and retail participation in the digital asset space, even as it navigates a more challenging market in the near term.