Coinbase Q3 Revenue Drops 17% as Trading Volume Decreases

TLDR

• Coinbase Q3 revenue fell to $1.2B from $1.45B in Q2, missing analyst expectations
• Company announced $1B share repurchase program despite revenue decline
• Trading volumes decreased to $185B from $226B, with retail trading showing steeper decline
• Base network showed 55% growth in transaction processing quarter-over-quarter
• MicroStrategy plans to raise $42B over three years to purchase more Bitcoin

The cryptocurrency exchange Coinbase faced headwinds in the third quarter of 2024, reporting a decline in revenue while simultaneously announcing an ambitious share repurchase program.

The company’s revenue dropped to $1.2 billion from $1.45 billion in the previous quarter, falling short of analyst expectations of $1.26 billion according to FactSet data.

Despite the revenue decrease, Coinbase maintained profitability for the fourth consecutive quarter, reporting a $75 million profit compared to a $2 million loss in the same period last year.

The company’s performance reflects broader trends in the cryptocurrency market during the summer months.

Trading volumes, which represent Coinbase’s primary revenue source, decreased to $185 billion from $226 billion in the second quarter.

The decline was particularly noticeable among retail customers, with retail transaction revenue falling 27% to $483 million from $664 million in the previous quarter.

Institutional trading also saw a downturn, though less severe than retail. Transaction revenue from institutional users decreased 13% to $55 million from $63 million in the second quarter, highlighting a broader slowdown in trading activity across user segments.

In a move that caught market attention, Coinbase’s board of directors authorized a $1 billion stock repurchasing program.

The timing and amount of these repurchases will depend on market conditions, according to the company’s announcement.

The company’s stock performance has shown volatility throughout the year. After reaching highs of $279 in March, coinciding with Bitcoin’s peak around $73,000, shares had settled at $211 before the earnings announcement. The stock experienced a 4% decline in after-hours trading, dropping to $202.

Coinbase’s stablecoin revenue showed resilience, reaching $246 million, a slight increase from $240 million in the previous quarter. This growth was supported by a 7% increase in USDC holdings on the platform, which reached $6.6 billion.

The company’s layer-2 scaling network, Base, emerged as a bright spot in the quarterly results. The network showed strong growth, with transaction processing increasing by 55% compared to the previous quarter, establishing itself as a leader in on-chain activity.

In related industry news, MicroStrategy announced plans to raise $42 billion over the next three years to purchase Bitcoin. The company’s “21/21 Plan” involves raising $21 billion through equity and another $21 billion through fixed income.

The cryptocurrency market has seen increased institutional interest, particularly in Bitcoin ETFs. BlackRock’s iShares Bitcoin Trust reported $3.36 billion in trading volume, reaching its highest level in six months.

Looking ahead, Coinbase maintains its focus on product development and user growth. The company expressed its readiness to work with either administration following the 2024 election, viewing the prospects for pro-crypto legislation as favorable.

Oppenheimer analysts had previously predicted the slowdown in trading volume, attributing it to a lack of positive catalysts and uncertainty surrounding the U.S. election.

However, they noted that Vice President Kamala Harris’ support for digital asset regulation could potentially benefit trading volumes in the fourth quarter.

The company continues to diversify its revenue streams through subscriptions and services, a strategy that proved valuable during previous market downturns. This approach has helped maintain stability despite fluctuations in trading volume.