Coinbase Q3 Profit Hits $719M on Crypto Gains

Coinbase reported a $719 million profit for the third quarter, a result driven primarily by gains on its cryptocurrency investment portfolio and rapid expansion in its prediction market business. The exchange released its earnings on Oct. 29, showing total revenue of $1.216 billion, a figure that remained largely unchanged from the previous quarter but declined 35% compared to the same period last year.

Prediction Markets Drive Revenue Growth

While traditional crypto spot trading volumes fell 8% to $134.5 billion, Coinbase’s prediction market segment emerged as a key growth driver. The business 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 segment, along with derivatives, accounted for approximately 25% of the company’s transaction revenue. This growth helped offset a 44% year-over-year decline in total transaction revenue, which fell to $590 million. Coinbase’s share of global crypto trading activity rose to 10.7% from 5.6% a year earlier, supported by growth across spot and derivatives products.

CFO Alesia Haas noted that the company recorded its 15th consecutive quarter of positive adjusted EBITDA, which reached $333 million, up 60% from the previous quarter. Haas stated that prediction market revenue is “less correlated to crypto volatility,” contributing to the firm’s resilience. The exchange also secured CFTC approval for its own Designated Contract Operator (DCO) to support predictions, allowing it to launch its own contracts and improve economic margins.

USDC Balances Rise, But Rewards Costs Increase

Coinbase reported record average USDC balances of $22 billion, a 49% year-over-year increase representing about 30% of the stablecoin’s average circulating supply. Despite this growth in holdings, stablecoin revenue declined 5.4% to $306.9 million. The decline was attributed to lower interest rates, which created a $52.8 million drag on revenue, partially offset by an $84.6 million positive contribution from higher average balances.

At the same time, USDC rewards expenses increased 15.8% to $129.2 million, reflecting the rising cost of attracting and retaining stablecoin holders. After subtracting these rewards from stablecoin revenue, net stablecoin revenue was approximately $177.7 million, down 16.6% from the comparable quarter. Haas indicated that Coinbase and Circle, the issuer of USDC, share a goal to grow the stablecoin’s market cap and adoption, with potential for both joint and independent partnerships to bring new participants into the ecosystem.

Crypto Investment Portfolio Gains Lift Profit

Coinbase increased its direct exposure to cryptocurrency markets during the quarter, adding 643 BTC to its investment holdings, bringing the total to 17,954 BTC. The company also increased its Ethereum investment holdings by 2,370 ETH to 152,649 ETH. The fair value of the company’s cryptocurrency investment portfolio rose 51.5% from $1.47 billion to approximately $2.22 billion.

This appreciation in asset values resulted in approximately $715 million in gains on crypto assets held for investment, which was the primary driver of the $719 million net profit. Excluding these investment gains and certain other items, adjusted net income stood at $78 million. The filing noted that a hypothetical 50% change in cryptocurrency prices would alter the fair value of the investment portfolio by approximately $1.1 billion, with the resulting gain or loss flowing through earnings.