Coinbase reported Q3 earnings this week, and it’s a bit of a mixed bag. They expected to make a loss of -$2.40 per share, which they slightly exceeded at -$2.43 per share. Their revenue was a pretty wide loss, guiding investors towards $654M and actualizing $590M. Coinbase is greatly affected by the current macroeconomic situation, which has resulted in lower valuations and trading volume.
A year ago, when the crypto market was ripping hot, Coinbase was reporting profits. Now they’re reporting losses and seeing consistent declines in their active users, which they measure as monthly transacting users (MTUs). They’re at ~8.5M MTUs, down from 9M in the previous quarter. This is actually beating analyst expectations, which were roughly 7.8M MTUs.
The part of the earning report that gets interesting is the breakdown of the company’s revenue. Retail transaction revenue, the largest component of Coinbase’s revenue, was down sharply. Q2 yielded $616M in net revenue while Q3 dropped to $346M. CEO Brian Armstrong made it clear that Coinbase’s focus now was on subscription revenue, which was a more interesting story.
33% of the trading volume came from Ethereum, and 31% from Bitcoin, however Bitcoin trading resulted in more revenue.
Subscription revenue as a whole was up nearly 25%, from $147M to $210M quarter over quarter. The bulk of this came from interest income, which was up 213% from last quarter largely driven by rising interest rates. In the shareholder letter, Coinbase specifically points out USDC participation as a component of this.
Coinbase also notes in the shareholder letter that “Staking user growth was driven primarily by Solana, which we began supporting in June.”