Thesis
Despite market volatility and cyclical downturns, the crypto industry continues to increase adoption among younger generations. For example, in late 2022, nearly 50% of zoomers and millennials said they wanted crypto asset offerings in their 401(k) plans. Coinbase alone now has over 100 million verified users. Though in June 2022 the total crypto market cap had fallen a total of 70% from its all-time high , the crypto market cap remains well in excess of $1 trillion in 2023, indicating the enduring value of crypto assets and a significant degree of retained adoption.
With the rise of crypto assets classes like NFTs and decentralized finance (DeFi), tracking crypto transactions, price action, and portfolio performance has become increasingly complex. More than 5 million people were trading crypto between 2014 and 2015, but fewer than 1K taxpayers reported taxable gains in crypto assets on their tax returns in 2022.
CoinTracker enables consumers to seamlessly track their entire crypto portfolio across exchanges and wallets, helping users see their market value, investment performance, transactions, and taxes as they transact with cryptocurrency. CoinTracker is a tax partner for many top exchanges and tax products, including Coinbase, OpenSea, Intuit’s TurboTax, and Blockchain.com, whose users benefit from a more seamless tax experience and, in many cases, the ability to receive free tax reports.
Founding Story
CoinTracker was founded by Chandan Lodha and Jon Lerner in 2017. Lodha previously worked at Google as a Product Manager for 3 years. Jon worked as a software engineer at Google and later co-founded and acted as CTO of TextNow, a phone service.
Lodha and Jon were cryptocurrency hobbyists who noticed their investments reaching significant sums during the 2017 crypto bull market. However, they struggled to track their portfolio performance because they couldn't find clear information about their investments on exchanges like Coinbase and Binance. Chandan and Jon created a Google Apps script spreadsheet to import prices from exchanges and automate their portfolio tracking.
Eventually, the spreadsheet became too complex and had so many formulas that it took two minutes to load. In early September 2017, Jon built a simple web app that codified the spreadsheets and posted a link in a few online groups to see if anyone else found it useful. It resonated instantly with people. In January 2018, they joined Y Combinator and raised a $1.5 million seed round.
Product
Crypto Portfolio Assistant
Source: CoinTracker
CoinTracker's platform lets users see their gains and losses across all assets and provides daily portfolio updates. The visualization tools allow users to easily understand their portfolio performance over various periods, such as one day, one month, or one year. It also shows users tax-loss harvesting opportunities, allowing them to save on taxes.
CoinTracker’s portfolio assistant helps users track and monitor their crypto assets across 300+ exchanges. It synchronizes transactions from the connected wallet and exchange accounts like Coinbase, OpenSea, and Binance — enabling seamless portfolio updates. For those who prefer not to connect their accounts to CoinTracker via API, CoinTracker offers manual CSV uploads to sync transaction data to the portfolio assistant.
Crypto Taxes
Source: CoinTracker
The aggregation of a user’s crypto assets provides a natural transition to CoinTracker's tax product, which is supposed to be able to generate tax forms with minutes. This includes support for complex transactions that typically require a tax advisor, such as airdrops, forks, mining, staking, yield farming, and other crypto transactions.
The product also generates tax forms like Form 8489, Schedule D, and Schedule 1 that can be automatically sent to CoinTracker's tax filing partners. When users are considering potential transactions, it provides a preview of the estimated tax impact of the transaction to inform users better. In February 2023, CoinTracker also launched CoinTracker Connect, a white glove support service that connects users to tax professionals or support specialists specifically for crypto tax consulting to support their tax product further.
NFT Center
CoinTracker helps users manage all their NFTs in one place through the NFT Center. Users can filter by wallet, and date acquired to make it easy to track and manage NFTs. Adding new wallets to auto-populate NFTs into the NFT Center is also a one-step process. CoinTracker also helps determine the tax impact of NFTs. It syncs to all your wallets to pull NFT information and calculate the cost bases and gains/losses.
DeFi
CoinTracker also supports a variety of decentralized exchanges (DEXes) and decentralized apps to help users manage their DeFi transactions as part of their crypto portfolio. It also creates a tax report that reconciles crypto, NFT, and DeFi transactions to save time and effort. DeFi taxes are more complicated than the typical crypto buy or sell transaction. CoinTracker tracks these transactions and calculates the tax impact.
Enterprise
CoinTracker offers a white-label enterprise tax product for crypto platforms that integrates with their existing tax offering. This includes all the core features, such as NFT and DeFi support, available in CoinTracker's first-party tax product. By integrating with CoinTracker's enterprise tax product, enterprise customers can offer their own branded tax offering. This provides a turn-key solution for enterprise customers to offer their users a comprehensive tax solution for their crypto transactions.
Market
Customer
CoinTracker started as a company that primarily served individual crypto investors with its portfolio and tax products. However, the company has since expanded to work with enterprise customers that want to offer white-labeled tax solutions to their customers. Initially, the portfolio assistant customers were active, crypto-native traders who struggled to track their portfolios accurately and account for their tax liabilities. Its customer base has now grown to include any individual who transacts with crypto assets and needs to account for tax liabilities while monitoring their crypto assets fragmented across different platforms.
Market Size
Despite a significant downturn in the crypto market in 2022, the total market cap of cryptocurrency is still over $1 trillion as reported by CoinMarketCap. According to Coinbase's Q3 2022 earnings call, 200-300 million people worldwide have used crypto, and the estimated number of users could grow to 1 billion within the next 5 years.
Source: CoinMarketCap
As new and more complex crypto transaction types and asset classes are developed, monitoring portfolios split across exchanges, DeFi wallets, and cold storage becomes increasingly challenging. This makes CoinTracker's portfolio aggregation more appealing to investors. As new regulation is introduced, self-accounting for crypto transactions will become increasingly inaccessible to individual investors. Crypto assets will require dedicated tax solutions.
Competition
CoinTracker faces competition from several players in the portfolio tracking space including CoinStats and Delta. Most portfolio trackers offer similar features, such as wallet and exchange synchronization, price alerts, and tax-loss harvesting support. The primary differentiators for these trackers are the number of asset classes, exchanges, and cryptocurrencies they support. Many crypto portfolio trackers are expanding their offerings beyond portfolio tracking to differentiate themselves from their competitors.
While there are a lot of trackers out there, there is a smaller pool of players it competes with when it comes to its enterprise product:
TaxBit - TaxBit is a cryptocurrency tax and accounting software that automates tax calculations and reports on cryptocurrency transactions. Users can link their exchanges and wallets to pull their transactions through their tax engine and auto-generate tax forms. It was founded in 2018 and has raised $253 million in funding. It raised $130 million in Series B, co-led by IVP and Insight Partners, with participation from Tiger Global, Paradigm, and Sapphire Ventures. TaxBit has partnered with the IRS to support crypto tax compliance and accounting.
Koinly - Koinly is a platform that generates tax reports for crypto trading and related activity automatically. It Integrates with all major exchanges, such as Coinbase, Binance, Bittrex, and CEX.io, simplifying crypto tax reporting. It was founded in 2018 and is headquartered in London.
Accointing - Accointing is the accounting, tracking, and tax optimization tool for Bitcoin and other cryptocurrencies. It was founded in 2018.
Lukka - Lukka is a technology and data services provider for middle and back-office crypto asset processing. One of its products is a full-service tax and business reporting. It was founded in 2014 and has raised $201 million in funding. It raised $110 million in Series E, valuing the company at more than $1.3 billion, led by Marshall Wace, a global alternative asset manager.
Business Model
Source: CoinTracker
CoinTracker offers a range of pricing tiers for its services. For its portfolio assistant, the company offers a free tier, an Enthusiast tier at $14 per month, and a Pro tier at $99 per month.
CoinTracker generates revenue from its tax product by charging annually for each tax year similar to TurboTax. The tax product offers a free tier, a Hobbyist tier at $59, and a Premium tier at $199.
The company's major costs include building integrations between CoinTracker and crypto asset platforms, which allow it to consume APIs to sync an individual's crypto transactions. While enterprise pricing is not publicly available, it is likely determined on a case-by-case basis based on the customer's needs.
Traction
Source: CoinTracker
As of January 2022, over 3% of the global cryptocurrency market is tracked on CoinTracker and it has synchronized over $50 billion in crypto assets on a daily basis. In 2022, the company forged a number of key partnerships with major exchanges, platforms, and tax service providers, including TurboTax, H&R Block, Coinbase, and OpenSea.
Valuation
CoinTracker raised a $100 million Series A in January 2022 which valued the company at $1.3 billion. The round was led by Accel, with participation from General Catalyst, Initialized Capital, Y Combinator Continuity, Coinbase Ventures, Intuit Ventures, Kraken Ventures, as well as Claire Hughes Johnson (Former COO, Stripe), Gokul Rajaram (Coinbase and Pinterest board member), Jeremy Liew (Early Investor in Affirm and Snapchat), and Alex Bouaziz (Deel CEO).
Prior to its series A, CoinTracker secured a $1.6 million seed round led by Initialized Capital, with participation from prominent investors like Alexis Ohanian, Garry Tan, and Serena Williams.
Key Opportunities
Enterprise Adoption
CoinTracker’s initial growth was largely fueled by the consumer market. The enterprise market, which is seeing increasing interest and adoption from institutions, is still largely untapped for CoinTracker, which lags behind competitors like TaxBit, which focused on enterprise-first. Traditional financial institutions like Fidelity are beginning to take notice and are positioning themselves to address the crypto market. For example, Fidelity began allowing bitcoin allocations in retirement savings plans in 2022. Enterprise adoption of crypto in general is a growth opportunity for CoinTracker in particular.
Product Expansion
Continuing to build out complementary product verticals is another opportunity. Deep integrations with crypto exchanges could enable new and native trading workflows powered by CoinTracker’s tax product. It could also open the door for other white glove services, such as financial advising for crypto assets. CoinTracker is a natural on-ramp for additional products.
Key Risks
Macroeconomics
Although CoinTracker's services are centered around the crypto market, it is not immune to the macroeconomic cycle. The crypto market has seen multiple boom and bust cycles in the past decade, and bear markets, referred to as "crypto winter," see slowed growth of crypto and reduced trading activity. Earlier in 2023, CoinTracker conducted layoffs of 20% of its headcount. This slowdown in the crypto market reduces the need for its products and presents headwinds for growth.
Late Mover
CoinTracker started in the consumer market and is playing catch-up in enterprise to competitors like TaxBit. The enterprise market has different needs than the consumer market, and enterprise customers require deeper integrations and a different go-to-market motion. The switching costs are high in the enterprise world, making a first-mover advantage much more significant compared to the consumer market, where any individual investor can change to another tax or portfolio service with minimal effort.
Summary
CoinTracker has seen early success, leading the consumer market with users reporting increased ease-of-use and better tax reporting compared to other solutions. As governments around the world continue to grapple with the rise of cryptocurrencies, CoinTracker will need to stay on top of regulatory changes and ensure that its platform complies with all relevant laws and regulations. The enterprise market presents significant opportunities for CoinTracker to grow, but the company will need to catch up with competitors that focus on institutional customers first.
The outlook for CoinTracker could be promising if the demand for cryptocurrency tracking and tax reporting solutions continues to grow. However, the company will need to stay ahead of the curve in a highly competitive and rapidly changing market to maintain its position as a leader in the space. Continued success will rely on CoinTracker growing its presence in the enterprise market, strengthening its position through category expansion, and fending off encroaching competition from other players.
