Gemini Says Less Exposed to Crypto but Balance Sheet Says Otherwise

Total revenue rose 37% while exchange revenue fell 38%, and services now generate more than trading. That is a genuine achievement and the company is entitled to claim it. But diversifying where the money comes in is not the same as diversifying what can go wrong, and on the second measure Gemini finished the quarter more exposed to crypto prices than it started, not less.

The card is a lender, not a feature

The Gemini Credit Card produced $16mn of revenue, the single largest growth contributor. It also produced a $16mn provision for credit losses.

A provision is money set aside for loans the lender expects not to get back. Gemini has now set aside $16mn against a book of $220mn, or 7.3%. That is an estimate of future losses rather than a tally of confirmed ones, and Gemini says it applies to one batch of accounts opened in the first quarter that was hit by fraud, not to the wider portfolio. Take that at face value and the number still describes a lending business that has revised its own bad-debt estimate twice in six months, first at $4.1mn and then at four times that.

What Gemini has not given is the information anyone lending money is normally asked for: how much it has actually written off, how many cardholders have fallen behind on payments, and what losses look like on the parts of the book fraud did not touch. It also lists card sign-ups among the handful of metrics it says it uses to run the business, then did not publish the figure. What is left out says more than the provision does.

The funding structure deserves attention too. Gemini bought and was repaid roughly $1bn of card receivables during the first half against that $220mn book, and 83% of the book sits pledged as collateral. This is a warehouse-funded revolving consumer lender operating inside a crypto exchange, and it is now the company's growth engine.

The crypto risk moved rather than shrank

Below the operating line, the quarter tells a different story from the one in the highlights.

Gemini took $162mn of realized and unrealized losses on crypto assets in the first half. It still holds $331mn of crypto, equal to about 71% of stockholders' equity. It took its $100mn May private placement of Class A stock in Bitcoin (BTC) rather than cash, which is why adjusted EBITDA deteriorated to negative $74mn in a quarter when the operating loss improved. And it carries $259mn of related-party loans denominated in crypto, which threw off a $126mn fair-value gain in the half that offsets much of the loss above it.

None of that is hidden. All of it sits in a company describing itself as building revenue streams less sensitive to crypto market forces. Both things can be true, but the second one applies only to the top line. An investor buying GEMI for reduced crypto correlation is buying a balance sheet where crypto still stands behind most of the equity.

The card compounds this quietly. Its rewards are paid in crypto, so the cost line rises with prices while the interchange revenue does not. It is a small short position embedded in a business sold as diversification.

Institutions moved desks rather than left

The exchange decline is being read as market softness. The arithmetic says something more specific.

Trading volume fell 66% to $3.8bn, while exchange revenue fell 38%. That works out at roughly 33 basis points of revenue per dollar traded against 18 a year earlier, so Gemini is earning close to twice as much on every trade it still handles. Meanwhile, OTC revenue went from $0.6mn to $4.7mn on higher institutional activity.

The most likely explanation is not that the market halved. It is that high-volume, low-margin institutional flow left the order book and reappeared on Gemini's own OTC desk, leaving a smaller and more retail-weighted exchange behind. If so, the headline exchange decline overstates the customer loss and understates something else: the firm's most economically important trading relationships have migrated to a negotiated-spread business with far less price transparency and no published volume figure.

Gemini did not address the change in take rate. It is the first question to put on the call.

The runway nobody has talked about

Cash and equivalents fell to $189mn from $252mn at the end of 2025, with operations consuming about $53mn a quarter. On that run rate, the current position covers something under four quarters.

That is not distress. Gemini has the crypto position to sell, and it has been selling. It is, however, a constraint, and it is why the expense discipline matters. Operating costs fell 15% sequentially and rose 24% year-on-year, and the third consecutive quarterly improvement in operating loss is real progress on a base still running at 2.7 times quarterly revenue.

What is missing is any statement of where this ends. No guidance on card loss rates, no target for breaking even, no runway framing. For a company at this burn rate with this cash position, silence on all three is a choice.

Doing the pivot without the profits

Coinbase (COIN) and Robinhood (HOOD) are building the same regulated super app, spanning crypto, equities, event contracts and derivatives. Both are doing it from profitability. Gemini is attempting it while burning cash in a soft market, which means every new licence, clearinghouse and product line is funded out of a shrinking balance in a quarter when the trading business that historically paid for such things fell by two thirds.

It has already narrowed to afford this. February's restructuring wound down the UK, the EU, other European jurisdictions and Australia, and the exit costs are excluded from adjusted EBITDA as unusual. That retreat now looks less like housekeeping and more like the first move in a deliberate consolidation onto US regulated rails, where its designated contract market and derivatives clearing licences from the US Commodity Futures Trading Commission (CFTC) give it something European operations never would.

The pivot may well work. Monthly transacting users rose 11% while acquisition and brand spend fell 99% to about $100k, which suggests the card is recruiting customers that the marketing budget no longer has to. But it is being financed by a balance sheet still levered to the asset class Gemini says it is diversifying away from, and underwritten by a credit book whose loss profile has not been shown to anyone.