Coinbase earnings show the company is now much more than just an exchange
Coinbase, a leading U.S. cryptocurrency exchange, shared its second-quarter results on Aug. 3. Despite showing a net loss, some positives emerged, like a 13% cut in operating expenses from the last quarter and a 3% boost in its cash reserves to $5.5 billion.
However, the exchange took a hit with a $97 million net loss, worse than its previous quarter, and saw a 32% drop in its adjusted EBITDA to $194 million in Q2.
One downside was the 7% fall in subscription and service revenue from Q1. The letter to shareholders revealed that a 28% decrease in the USD Coin (USDC) market cap partly caused this. Since Coinbase holds a stake in Circle, USDC's issuer, it gains from the interest rate offered by the stablecoin reserves.
Additionally, customer fiat balances deposited at the exchange serve as another revenue source. But despite these, Coinbase’s interest income fell by 16% from the last quarter to $201 million in Q2.
Even so, the numbers suggest that Coinbase has successfully lessened its dependence on trading fees. Subscription and service revenues matched trading revenues in the first half of 2023, a shift more noticeable when considering transaction costs consume about 15% of its revenues. This suggests that Coinbase has transitioned from a trading firm to a service broker, prioritizing recurring revenues.
Looking at Coinbase’s (COIN) share price, there isn’t a clear sign of this shift in focus throughout 2023. This suggests that either investors still firmly believe that trading fees will remain the key income driver for the company, or they simply haven’t been crunching the numbers as diligently as they should.
It’s impossible to accurately predict what direction the cryptocurrency market will take in the next few years, but
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