Coinbase Profits Jump 66%. But the Bigger Story Is Just Getting Started
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| By Beth Canova |
You might think a slow crypto market would be bad news for Coinbase (COIN).
After all, the company makes money when people trade Bitcoin (BTC) and other cryptos. And the past year has been tough for the broad crypto market as the winter freeze kicked in.
Less trading should mean less revenue. And less revenue should mean lower profits.
But Coinbase just showed why that old way of thinking may be out of date.
On Thursday, the largest U.S.-based centralized crypto exchange reported $719 million in third-quarter net income. That's a 66% jump from a year ago.
And here's the part that caught my eye: Coinbase pulled this off even as its revenue fell 35% from last year.
How?
That answer tells us a lot about where the crypto industry is headed.
Coinbase Is Becoming More Than a Crypto Exchange
For years, Coinbase had a simple business model. People bought and sold crypto, and Coinbase took a fee from those transactions.
When crypto prices soared, trading picked up, and Coinbase made more money.
When markets cooled, trading slowed. And so did its business.
That link hasn't gone away. As you can see, trading volume is down from its bull market peak.
But Coinbase is hard at work to make it less important.
In the third quarter, revenue from subscriptions and services reached $570 million. That's 49% of the company's net revenue.
Think about that …
Nearly half of Coinbase's net revenue now comes from services beyond its core trading business. Those include stablecoins, staking, lending and paid subscriptions.
And several of those businesses are growing.
For example, paid subscriptions to Coinbase One rose 24% from a year ago. These customers tend to trade more, hold larger balances and stick around longer.
That's the kind of customer base any financial firm would love to have.
A New $200 Million Business Is Taking Shape
One of the fastest-growing parts of Coinbase’s operations wasn't even a major part of its story a few years ago: prediction markets.
These markets let people trade contracts based on the outcome of future events. That could mean an election, an economic report or the price of Bitcoin.
Think platforms like Kalshi or Polymarket.
And business is booming.
Coinbase says its prediction markets have now passed $200 million in annualized revenue.
To be clear, that doesn’t mean Coinbase has already earned that money. Rather if the recent pace of business continues, it will produce more than $200 million over a full year.
It’s a distinction worth making for investors. But it doesn’t undermine the reality that the growth is striking.
The number of people trading predictions each day rose more than 60% from the prior quarter. And Coinbase says prediction market revenue has grown at an average quarterly rate of 82% since launch.
Why does this matter?
Because people don't need Bitcoin to hit a new high to trade on future events.
That gives Coinbase another way to earn money, even when crypto prices are stuck in a rut.
Stablecoins Could Be an Even Bigger Prize
There's another part of Coinbase's business that deserves attention.
Stablecoins. These digital tokens — designed to hold a steady value tied to the U.S. dollar — are becoming useful tools for moving money, making payments and settling trades.
Related Story: Stablecoins Are Becoming Crypto’s Biggest Business
And Coinbase is right in the middle of that shift.
During the third quarter, customers held an average of $22 billion in USDC across Coinbase products.
That's a record. It's also 49% more than a year ago.
Coinbase earns revenue from its role in the USDC ecosystem. And as more people use stablecoins, that business could keep growing.
This is especially important as banks and payment firms explore ways to move dollars over blockchain networks.
Crypto's future may depend on much more than whether Bitcoin goes up tomorrow. It may also depend on how much money moves through these networks every day.
And Coinbase wants to help power that activity.
But There's a Catch in Those Earnings
Before investors get too excited about the 66% profit jump, there's an important detail. Coinbase's reported profit included about $715 million in gains on crypto assets it holds as investments.
Those gains can change as crypto prices move.
After adjustments, Coinbase reported net income of just $78 million.
That's a much smaller figure than the headline number. And total revenue fell sharply from a year ago.
So Coinbase hasn't escaped the crypto market's ups and downs.
Not yet.
Prediction markets also face regulatory risks. Stablecoin revenue can change with interest rates. And competition remains fierce.
Still, the company's adjusted earnings before interest, taxes, depreciation and amortization rose 60% from the prior quarter to $333 million.
That suggests there's real progress beneath the headline numbers.
What This Means for You
Coinbase is trying to become a place where people can trade, save, borrow and move money using blockchain technology. All in one place.
Related Story: Coinbase Wants to Be Everything, Everywhere, All at Once
And it's making progress.
Its share of crypto trading volume reached 10.7% in the third quarter. That's its fourth straight quarter of market share gains.
Meanwhile, stablecoins, subscriptions and prediction markets are giving it new ways to earn.
None of this means Coinbase stock is a sure winner. The company still faces real risks. And investors should weigh those risks against its stock price and valuation.
But the bigger trend is hard to miss.
Crypto companies are finding ways to grow that don't depend solely on the next Bitcoin rally.
That's a sign of a market that's starting to mature. And for long-term investors, that may be one of the most important trends to watch.
Because the next wave of crypto growth won’t come from trading alone.
It’ll come from the businesses that make crypto useful to everyday investors, every day.
Best,
Beth Canova
