Coinbase Reports Q3 Revenue Decline Even as Bitcoin Approaches New All-Time Highs

The exchange's third-quarter shareholder letter, released on October 30, shows third-quarter revenue of $1.2 billion, down 17% from the previous quarter

Coinbase reported a decline in Q3 revenue despite Bitcoin approaching new all-time highs. The exchange’s third-quarter shareholder letter showed a 17% decrease in revenue compared to the previous quarter, primarily due to tumbling transaction profits.

Coinbase attributed the quarterly decline in transaction fees to reduced user activity despite the market’s uptrend. Total transaction revenue amounted to $573 million, marking a 27% decrease from Q2. While transaction fees traditionally make up the bulk of the exchange’s revenue, a 6% reduction in overall operating expenses, paired with a positive $75 million in net income, allowed the company to stay in the green.

Coinbase’s diversification strategy was evident as the firm pivoted towards subscription and services revenue, though even this sector saw a modest decline of 7%, ending at $556 million. Despite the decline, the exchange highlighted the growth in its stablecoin business, with USD Coin (USDC) contributing $247 million in revenue, a slight 3% increase from the previous quarter. CEO Brian Armstrong noted that USDC continues to be one of the “fastest-growing major USD-backed stablecoins,” driven by increased demand during the bullish market.

“Average native units for staking, custody, and on-platform USDC grew quarter over quarter, even with softer market conditions.”

Another key takeaway from Coinbase’s shareholder report was its strengthening balance sheet, bolstered by $8.2 billion in USD resources, an increase of $417 million from Q2. The firm’s cash reserve growth coincides with a recent authorization from its board of directors for a $1 billion share repurchase program. This step shows a renewed focus on shareholder value amid a more competitive exchange landscape.

“In Q3, we achieved our seventh consecutive quarter of positive Adjusted EBITDA, further affirming our capacity to manage through market cycles and capitalize on emerging trends.”

Finally, Coinbase expressed optimism regarding the upcoming 2024 U.S. elections, highlighting the potential for pro-crypto candidates and policies to favor the industry. Armstrong noted the firm’s support for crypto-forward initiatives and candidates, which Coinbase hopes will further regulatory clarity in the coming year.

Despite a challenging quarter, the firm remains optimistic that the ongoing bull run in Bitcoin and other cryptocurrencies will eventually reflect in improved transaction revenues as user activity catches up with market trends. However, the Q3 report suggests that even a bullish market doesn’t guarantee revenue increases if user engagement and transaction volumes lag behind.

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