Coinbase Q3 Profit Hits $719M on Crypto Gains Despite Trading Slump

Coinbase reported a $719 million net profit for the third quarter, reversing a $359 million loss in the previous period. The earnings, released on Oct. 29, were primarily driven by approximately $715 million in gains on cryptocurrency assets held for investment, which offset significant declines in core trading revenue.

Total revenue for the quarter stood at $1.216 billion, a figure that remained largely unchanged from the second quarter but fell 35% compared to the same period last year. Crypto spot trading volume decreased by 8% to $134.5 billion, leading to a 44% year-over-year decline in transaction revenue, which dropped to $590 million.

Prediction Markets Drive Diversification

While traditional trading volumes softened, Coinbase’s prediction-market business emerged as a significant growth engine. The division surpassed $200 million in annualized net revenue during the quarter, following an 82% compound quarterly growth rate since its launch. Daily traders on the platform increased by more than 60% compared to the previous quarter.

CEO Brian Armstrong described prediction markets as “one of the fastest-growing products in Coinbase history.” The company noted that prediction markets and derivatives together accounted for approximately 25% of total transaction revenue. This diversification has helped stabilize the company’s earnings profile; CFO Alesia Haas stated that prediction-market revenue is “less correlated to crypto volatility,” contributing to the exchange’s 15th consecutive quarter of positive adjusted EBITDA, which reached $333 million, up 60% from the prior quarter.

Coinbase’s share of global crypto trading activity also expanded, rising to 10.7% from 5.6% a year earlier. Additionally, subscription and services revenue increased 3% quarter over quarter to $570 million, now representing 49% of net revenue. The company secured CFTC approval for its own Designated Contract Operator (DCO) to support predictions, allowing it to launch proprietary contracts and improve trading economics.

USDC Balances Rise, Rewards Costs Climb

Despite record growth in stablecoin holdings, the economics of Coinbase’s USDC business faced pressure from rising costs. The exchange reported a record $22 billion in average USDC balances, a 49% year-over-year increase that represented about 30% of the stablecoin’s average circulating supply.

However, stablecoin revenue declined 5.4% to $306.9 million from a reclassified $324.5 million in the prior year period. Simultaneously, USDC rewards expenses increased 15.8% to $129.2 million. After subtracting these rewards from stablecoin revenue, the net contribution was approximately $177.7 million, a 16.6% decline from the comparable quarter. The filing attributed an $84.6 million positive revenue contribution to higher balances, which was partially offset by a $52.8 million drag from lower interest rates affecting reserve income.

Investment Portfolio Value Surges 51.5%

Coinbase increased its direct exposure to digital assets during the quarter. Its Bitcoin holdings for investment rose by 643 BTC, from 17,311 BTC at the end of June to 17,954 BTC in September. Ethereum investment holdings increased by 2,370 ETH, reaching 152,649 ETH from a starting balance of 150,279 ETH.

The company’s total cryptocurrency investment portfolio increased in fair value from $1.47 billion to approximately $2.22 billion, a 51.5% quarterly increase. This appreciation in asset value was the primary driver of the reported net profit. Excluding these investment gains and certain other items, adjusted net income stood at $78 million. Coinbase estimated that a hypothetical 50% change in cryptocurrency prices would alter the fair value of its investment portfolio by approximately $1.1 billion, with the resulting impact flowing directly through earnings.