Coinbase quarterly loss narrows, revenue exceeds estimates

PORTLAND – Coinbase Global, the largest US cryptocurrency exchange, said its second-quarter loss narrowed and revenue exceeded estimates. 

The net loss for the little more than a decade-old firm narrowed to US$97 million (S$130 million), or 42 US cents a share, from a record US$1.1 billion, or US$4.98 a share, a year earlier. It was the sixth consecutive quarterly loss. Even so, the shares have more than doubled in 2023. 

Revenue declined 12 per cent to US$707.9 million, higher than the US$631.2 million consensus estimate of analysts surveyed by Bloomberg. Quarterly transaction revenue fell to US$327.1 million.

Coinbase benefited from a rebound in crypto prices in the first half of 2023, while its chief executive Brian Armstrong has become more deeply embroiled in a fight with US regulators.

The Securities and Exchange Commission sued the firm in June for allegedly running an illegal exchange, broker and clearing agency. Coinbase’s chief legal officer Paul Grewal said in an earnings call that it will file a brief on Friday asking the court to dismiss the case.

“Coinbase’s revenue beat versus consensus estimates was due in large part to better-than-expected interest income and staking revenue, which are two areas of the company’s business that appear to be at risk going forward,” said Mr Mark Palmer, an analyst at Berenberg Capital Markets who has a “hold” rating on the company’s stock.

Interest income, a key revenue driver, dropped to US$201.4 million from the prior quarter after circulation of the USDC stablecoin declined.

Meanwhile, blockchain rewards revenue, primarily from staking, which is under pressure after Coinbase was ordered to stop staking additional assets in four US states, rose. 

Shares of Coinbase were little changed around US$90 after initially jumping following the release of the quarterly results. 

The company in May launched the Coinbase International Exchange, on which some investors based outside the US can trade crypto derivatives. The venue saw US$2.1 billion of trading volume in the past 30 days.

Global trading in Bitcoin futures alone totalled US$550 billion in July, data compiled by the Block shows. Over 50 institutions have been onboarded, and Coinbase plans to add features in the second half of 2023, such as additional asset trading books and spot trading, the company said. 

Customer fiat balances decreased to US$3.8 billion from US$5.4 billion at the end of the first quarter, primarily due to outflows from a small group of crypto-native institutions, which held higher balances previously “in connection with the banking crisis”, the company said.

Bitcoin accounted for 40 per cent of trading volume in the quarter, up from 31 per cent in the year-ago period, according to Coinbase.

Second-quarter non-trading revenues exceeded trading revenues slightly due to low volatility, said Ms Alesia Haas, Coinbase’s chief financial officer. “Volatility has been a key driver of our transaction revenue,” she said. “This is the lowest volatility we have seen in many many years.” Still, Ms Haas pointed out that crypto trading is cyclical, and she expects transaction volumes to come back.

In the current third quarter, Coinbase expects subscription and services revenue to reach at least US$300 million. Coinbase said it generated about US$110 million in total transaction revenue in July. 

“We remain focused on continuing to optimise our expense base, though we believe the magnitude of future efficiency gains will likely moderate going forward,” the company said in its shareholder letter. BLOOMBERG