As new products and use cases grow at Coinbase and Circle, pressure on transaction and reserve revenue continues.
In the latest results from Coinbase and Robinhood, revenue from crypto transactions declined, while Circle’s reserve revenue also fell. Although the companies’ new services are driving customer and usage growth, that growth has not yet translated across all revenue streams.
Coinbase’s third-quarter transaction revenue fell 23 percent year over year to $590 million. Consumer spot trading volume declined 9 percent from the previous quarter, while institutional transaction revenue fell 8 percent. The company’s total revenue remained at about $1.22 billion. Lower expenses and contributions from new products helped adjusted EBITDA rise 60 percent quarter over quarter to $333 million.
Prediction markets are growing at Coinbase
Daily users of Coinbase’s prediction market product increased by more than 60 percent quarter over quarter. Prediction markets and derivatives trading accounted for about a quarter of the company’s transaction revenue. StoneX analyst Mark Palmer said about 60 percent of Coinbase’s net revenue came from recurring activities or activities not directly tied to spot crypto trading. Barclays analyst Benjamin Budish said that despite its product diversity, dependence on spot trading remained a significant challenge.
Circle’s reserve revenue from the cash and U.S. Treasury securities backing USDC fell 8 percent year over year to $658 million, as lower interest rates took their toll. USDC supply stood at $73.9 billion at the end of September, little changed from a year earlier.
Circle’s total revenue rose 17 percent year over year to $865 million. However, $182 million of that amount came from token presales for the company’s new blockchain, Arc. Excluding the presales, revenue would have fallen about 8 percent year over year.
USDC usage is rising, but revenue remains under pressure
Circle’s USDC transaction volume rose 49 percent year over year to $13.9 trillion. The annualized volume of its payments network reached $41.3 billion, while the number of wallets holding more than $10 in USDC increased 16 percent.
USDC balances on Coinbase’s platform also reached a record average of $22 billion. However, rewards paid to attract and retain these balances rose 9 percent quarter over quarter. After accounting for rewards, Coinbase’s stablecoin revenue rose 3 percent quarter over quarter but fell about 16 percent year over year. Clear Street analyst Owen Lau said the increase in USDC usage was not generating the same profitability for every additional dollar.
Not investment advice.