Coinbase posted lower-than-expected results for the first quarter as crypto prices fell, hurting one of the company’s key revenue drivers – spot trading in digital assets.
This way coinbase The performance for the quarter ended March 31 compared with what Wall Street had expected, based on a survey of LSEG analysts:
- earnings per share: $1.49 loss vs. 27 percent expected profit
- Income: $1.41 billion vs. $1.52 billion expected
Coinbase shares were down 4% in after-hours trading.
The company, which operates the largest cryptocurrency market in the US, reported transaction revenue of $755.8 million, compared with $805.2 million expected by analysts. Subscription revenue was $583.5 million, compared to an estimated $619.3 million.
severe recession
Given the crypto price decline at the beginning of the year, investors were facing a sharp slowdown in trading volumes. Bitcoin There was a 12% increase in March, but a 22% decline in the first quarter.
Coinbase’s net income is often distorted by accounting rules that require it to value its large crypto holdings based on whatever the price is at the end of the quarter, causing reported earnings to fluctuate widely even if no assets are sold.
Known largely for its cryptocurrency trading platform, Coinbase is trying to diversify its revenue streams through subscription and services businesses, including revenue from stablecoins and staking.
Due to the increase in the market cap of the USDC stablecoin and the all-time high average of USDC held in Coinbase products, stablecoin revenues totaled $305 million, up from $274 million last year.
The era of crypto’s easy moonlighting and hype-driven returns is fading as exchanges increasingly move toward more diversified trading revenues derived from prediction markets and real-world assets rather than relying on more speculative investments.
“We’re trying to diversify the things that people can trade so that as markets change, as different behaviors change, we’ll always have something that people want to trade,” Coinbase Chief Financial Officer Alecia Haas told CNBC. “Diversification will help mitigate some of the volatility we have seen from pure crypto-only trading.”
Investors are looking for signs that Coinbase can still make money when crypto trading is halted. Critical to that effort is Coinbase’s success in consolidating non-transactional businesses to offset the cyclicality of transaction fees during the recession.
beyond crypto
While top- and bottom-line results fell short of expectations, Coinbase saw promising growth across its diverse offerings, including event contracts and support for trading crypto derivatives and tokenized real-world assets.
The company recorded nearly $4.2 billion in derivatives trading volume in the first quarter, up 169% from the same period a year earlier. Despite the decline in crypto prices this year, the exchange gained share in both spot and derivatives trading globally, with crypto trading volume market share reaching an all-time high of 8.6%.
Coinbase also estimates that its prediction markets business will hit $100 million in annual revenue by the end of this year. The business segment was launched in late January in partnership with Kalshi.
The push to diversify away from crypto underpins Coinbase’s effort to create an “everything exchange” — an initiative unveiled a year ago by CEO Brian Armstrong to make the company less reliant on trading tokens like Bitcoin, Ether and XRP.
Investors listened during Coinbase management’s call with analysts Thursday at 5:30 p.m. ET for an update on the trading platform’s margins and operating discipline following this week’s announcement that the company will be cutting about 14% of its workforce, or 700 jobs. Coinbase pointed to the layoffs as part of a broader, AI-driven restructuring effort, and cited the crypto downturn as a catalyst.
The job cuts underlined Wall Street’s expectations that soft business conditions could persist in the second quarter.
Read Coinbase’s full shareholder slide deck Here.
Correction: This story has been amended to reflect that the CEO of Coinbase is Brian Armstrong. His name was misspelled in the previous version.
