Leading U.S. cryptocurrency exchange Coinbase has released its third-quarter financial report revealing it has made over a billion dollars in revenue, most of which is from transaction fees.
Coinbase revealed its third-quarter financials on Nov 9 and reported making $1.23 billion in net revenue for the period. This is down 39% from the previous quarter which saw the company rake in a record $2 billion in revenue.
The report stated that net income was just $406 million, down almost 75% from the second quarter which netted the firm a whopping $1.6 billion in profits. It reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $618 million.
Coinbase described the period as having “softer crypto market conditions, driven by low volatility and declining crypto asset prices,” but still managed to notch up a tidy profit.
Highly profitable fees
Coinbase is known for having some of the highest transaction fees in the industry and they remain the primary source of income for the company.
It reported that of the total revenue, $1.08 billion came from retail and institutional transaction fees. This equates to 88.25% of the total revenue but was a decrease of 44% from the previous quarter.
“Weighted average retail transaction fee rates were lower in Q3 compared to Q2 due to relatively higher trading volumes on Coinbase Pro, where we offer a tiered fee structure.”
The remaining $145 million in revenue came from subscriptions and services such as blockchain rewards, custodial fees, earn campaign revenue, and interest income.
The company had total operating expenses of $1.02 billion for the quarter, a decline of 25% from the previous quarter.
The company ended Q3 with approximately $6.4 billion in cash and cash equivalents. This is inclusive of the $2 billion in net proceeds associated with the senior notes issued in September 2021.
It predicted better results in Q4 stating that October trends include higher levels of activity among retail traders. Historically, retail traders use Coinbase more during periods of heightened volatility, the report added.
Coinbase stock tanks
The company’s shares did not react well to the 75% decline in net income. COIN prices tanked 13% in after-hours trading according to MarketWatch. Shares fell from $357 at the close of trading on Nov 9 to $310 after-hours.
COIN has gained 34% since the beginning of October, however, and is likely to recover from this dip should crypto markets remain buoyant.