Coinbase Surpasses Analyst Expectations and Doubles Profit in the Second Quarter

Coinbase today announced its profitability report for the second quarter, achieving a profit of just over $1.6 billion, nearly double that of the first quarter. The company also reported revenue of $2.03 billion, exceeding analyst forecasts of $1.88 billion. 

The cryptocurrency exchange also reported an increase in user activity, noting that the number of monthly retail users (MTU) rose to 8.8 million, a 44 percent increase compared to the first quarter of this year.

In a sign that Coinbase may finally be finding a way to diversify its revenue sources, the company reported earnings of over $100 million from subscriptions and services; however, this figure is still overshadowed by transaction fee revenues of $1.9 billion, which remains the main component.

In another significant milestone, trading volume in Ethereum has surpassed Bitcoin on the platform for the first time, with Ethereum accounting for 26 percent of the volume compared to 24 percent for Bitcoin.

In its Q2 letter to shareholders, Coinbase also noted the growing diversity of participants in the cryptocurrency market. The company reported that it now has over 9,000 institutional clients and highlighted that the auction house Sotheby’s settled its first cryptocurrency transaction in the last quarter.

Coinbase’s stock price has risen in recent weeks, surpassing $280 on Tuesday. This is a significant improvement for the shares, which traded as low as $220 in June, but are still far from the $342 reached shortly after the company went public in May.

Although Coinbase’s earnings far exceeded expectations for the quarter, a large part was due to the significant volatility of the crypto market this spring, a period when Bitcoin reached an all-time high of over $60,000 . Since Coinbase earns a substantial amount of its revenue from trading fees, the company benefited from both the bull market and the subsequent decline, something that is unlikely to be repeated in the third quarter, which is marked by reduced volatility.

Coinbase acknowledged that volatility drove and accounted for most of the earnings but warned that it is unlikely to repeat that performance.

– As a result, we believe that retail MTUs and total trading volume will be lower in Q3 compared to Q2 – Coinbase stated.

Other significant aspects from the letter to shareholders include that Coinbase has added more cryptocurrencies for trading than it did in all of 2020, now supporting 83 for trading and 142 for custody, and that custody revenues from the first quarter to date have amounted to $35 million. This amount refers to custody revenue, which includes storing digital assets on behalf of large clients, and is not subject to volatility and has been a key strategic goal for the company for several years.