Coinbase’s Quarterly Trading Volume Fell to $92 Billion

Coinbase Global filed its second-quarter results on August 3, 2023, reporting that trading volume on its platform fell to $92 billion during the three months ended June 30. The disclosure mattered because Coinbase was the largest publicly traded U.S. cryptocurrency exchange and offered one of the clearest institutional measurements of how lower volatility, reduced participation and higher interest rates were reshaping the digital-asset business.

The company reported $707.9 million in total revenue and a $97.4 million net loss for the quarter. Total revenue was 12% below the $808.3 million recorded in the second quarter of 2022. The loss, however, was substantially narrower than the $1.09 billion loss reported for that earlier period, reflecting lower operating expenses and the absence of some large 2022 impairment-related charges.

Coinbase also reported $194 million of adjusted EBITDA, compared with negative $151 million in the second quarter of 2022. Adjusted EBITDA was a company-defined, non-GAAP measure and did not mean Coinbase had returned to accounting profitability.

Trading activity continued to contract

Coinbase’s $92 billion of quarterly trading volume consisted of $14 billion from consumer customers and $78 billion from institutions. Total volume was down 37% from $145 billion in the first quarter of 2023 and down 58% from $217 billion in the second quarter of 2022.

Transaction revenue fell to $327.1 million, 13% below the first quarter of 2023 and 50% below the second quarter of 2022. Consumer transaction revenue was $310 million, while institutional transaction revenue was $17 million. Coinbase attributed the sequential decline principally to lower trading activity during what it described as a period of multi-year-low crypto volatility; higher realized fee rates partly offset the volume reduction.

These figures cover Coinbase’s platform rather than the entire cryptocurrency market. The company defined trading volume as the U.S.-dollar-equivalent value of spot matched trades between buyers and sellers on its services. The metric therefore excluded activity on competing centralized exchanges, decentralized protocols and other venues.

Interest income changed the revenue mix

Subscription and services revenue reached $335.4 million, slightly exceeding transaction revenue. Interest income accounted for $201.4 million of that category, compared with $32.5 million in the second quarter of 2022. Coinbase said the increase reflected higher returns from its USDC revenue-sharing arrangement and interest-bearing customer custodial funds as U.S. interest rates rose.

Blockchain-rewards revenue was $87.6 million, while custodial-fee revenue was $17 million. The resulting mix illustrated an important transition: Coinbase remained exposed to cryptocurrency trading cycles, but staking, custody, stablecoin economics and interest income had become material offsets when spot-market activity weakened.

That diversification had limits. Subscription and services revenue declined 7% from the first quarter of 2023, principally because lower USDC market capitalization reduced interest income. Coinbase’s results therefore remained sensitive to crypto-asset balances, token prices, monetary policy and regulatory treatment as well as trading volume.

Regulatory uncertainty remained unresolved

The filing arrived after the Securities and Exchange Commission sued Coinbase on June 6, 2023. The SEC alleged that the company operated an unregistered securities exchange, broker and clearing agency and conducted an unregistered staking-service offering. Coinbase disputed those allegations. No court had resolved them by August 3, 2023.

Coinbase’s quarterly report warned that an adverse determination could require it to remove assets or discontinue services and could expose the company to penalties or other sanctions. Those were disclosed risks, not findings that such outcomes would occur.

For the third quarter, Coinbase reported approximately $110 million of transaction revenue during July 2023 and projected at least $300 million in subscription and services revenue. The company explicitly cautioned against extrapolating the July figure. On August 3, the defensible conclusion was narrower: trading activity remained depressed, but a broader revenue base and reduced expenses had made Coinbase more resilient than transaction volume alone suggested.