Coinbase beats Q3 estimates, USDC interest income rebounds to $172 million

Coinbase beat analyst estimates after reporting third-quarter revenue of $674.1 million, a decline of 4.7% from the previous quarter but an increase of 14.2% from the same period last year.

Analysts had been expecting quarterly revenue of $651 million, according to FactSet.

"Q3 was a strong quarter for Coinbase," the company wrote in a letter to shareholders. " While we have generated a net loss through Q3, we are on track to deliver meaningful positive Adjusted EBITDA for 2023, reflecting the direction we set at the beginning of the year to be a company that can generate Adjusted EBITDA in all market conditions."

Coinbase posted a net loss of $2 million for the quarter, compared to a loss of $545 million in the same period of last year.

USDC stablecoin interest

"In Q3, we obtained new licenses that enable us to access new markets and deliver new products [and] continued to drive toward regulatory clarity in the US," the company said in its earnings statement.

The company generated $172 million in USDC stablecoin interest income during the quarter. That's up from $151 in USDC interest income in the second quarter. 

"We anticipate that we will generate meaningful positive Adjusted EBITDA in full-year 2023, revised from our prior goal of improving full-year 2023 Adjusted EBITDA in absolute dollar terms versus full-year 2022," it wrote in its outlook for the current quarter. 

Trading volume’s continued slide

Trading volumes fell again during the quarter, dropping to $76 billion from the $159 billion the company registered during the same period a year ago. Coinbase’s trading volume has been sliding since the end of 2021 when prices for bitcoin and other cryptocurrencies began to fall precipitously.

Coinbase also generated less total transaction revenue, registering $288.6 million in the third quarter versus $365.9 million during the same period in 2022. This quarter’s transaction revenue was also down compared to the previous quarter.

The company cited a significant decline in market volatility dragging on revenues. "Crypto asset volatility, another driver of revenue, continued to decline in Q3 and reached the lowest level we have measured since 2016," Coinbase said. 

Looking ahead, the company expects fourth quarter transaction revenues to come "flat" when compared to this quarter after generating about $105 million in transaction revenue for October.

Coinbase doubles down on futures, SEC battle drags on

Earlier this week, Coinbase's service offering crypto futures trading to eligible retail U.S. customers went live. Now U.S. users can invest in "nano" bitcoin and ether contracts. When Coinbase secured regulatory approval from the initiative back in August, the company said that the global crypto derivatives market represents roughly 75% of global crypto trading volume. The company hopes to eventually make futures trading available to mobile users, it said during a call with analysts.

“We’re planting a lot of seeds and we continue to innovate despite the down market,” said Anil Gupta, vice president of investor relations at Coinbase. “A lot of the work that we’re doing on the product front, derivatives, is a big opportunity."

Coinbase’s ongoing standoff with the Securities and Exchange Commission continues to evolve but without a clear expectation of when, or if, matters will be resolved. Following the SEC’s move this summer to file a lawsuit charging Coinbase for not registering as a securities exchange, broker and clearing agency, the exchange turned around last month and asserted a judge should throw out the case on the grounds that the agency is acting outside its mandate.