Coinbase posts third consecutive quarterly profit despite crypto price retreat

Coinbase Global (COIN) reported its third consecutive quarterly profit despite cryptocurrency prices falling in the second quarter.

Net income rose to $36 million, compared with a net loss of $97 million a year earlier. Net income more than doubled to $1.4 billion. Analysts had expected slightly higher revenue and bigger profits.

Coinbase shares rose in after-hours trading after falling more than 5% on Thursday. Shares of the largest U.S. cryptocurrency exchange have risen more than 20% since the start of 2024.

Coinbase’s results were once again affected by a fairly recent accounting change that requires it to value crypto assets based on their end-of-period prices.

That worked in Coinbase’s favor in the first quarter, when it made $737 million in pre-tax earnings as prices soared. Bitcoin (BTC-USD) reached a record high near $74,000, largely due to excitement surrounding the launch of a number of new bitcoin ETFs.

But in the second quarter, when the price of bitcoin fell 12%, Coinbase saw a $319 million write-down on the value of its digital asset holdings. Crypto trading volume also pulled back.

In contrast, Coinbase’s profit and net income fell 97% and 13%, respectively, from the previous quarter.

The world’s largest publicly traded Bitcoin holder, MicroStrategy (MSTR), also saw its crypto assets slashed in the second quarter, reporting a $614 million writedown and a $102 million net loss.

Its shares fell more than 6% on Thursday and continued to sell off in after-market trading. They are still up more than 130% year to date.

Coinbase had several bright spots in the second quarter.

It generated revenues above expectations in its transaction fees, subscriptions and services businesses.

Transaction fees of $781 million were up 139% from a year ago. Subscription and services revenue was $599 million, up 78.6% from a year ago.

Coinbase also said it expects third-quarter subscription and services revenue to be in the range of $530 million to $600 million.

Coinbase CEO Brian Armstrong at the “Stand With Crypto” rally in Los Angeles in March. (Jason Armond/Los Angeles Times via Getty Images) (Jason Armond via Getty Images)

The company’s custody fees from partnerships with some of its new Bitcoin ETFs also rose 7% from the first quarter, doubling from the same period a year earlier to $34.5 million.

It could see even more gains from a new series of ETFs featuring the world’s second-largest cryptocurrency, Ether (ETH-USD), which launched last week.

“The execution at Coinbase is really strong,” Coinbase CFO Alesia Haas told Yahoo Finance in an interview.

“Despite the constant volatility of cryptocurrencies and the volatile market we always find ourselves in, we are really happy with our results.”

The story continues

Despite making some progress, Coinbase still faces some regulatory issues to resolve.

The company’s biggest problem is a lawsuit filed by the Securities and Exchange Commission in 2023 alleging that the company violated U.S. federal securities laws.

Coinbase and its CEO Brian Armstrong are fighting the allegations, and the critical lawsuit could take years to resolve.

The company is also trying to influence how the U.S. regulates cryptocurrencies by helping to create a lobbying battle fund during a critical election year.

Fairshake, the crypto industry’s largest super-PAC, has now raised $203 million, more than any other super-PAC, according to data tracked by Open Secrets.

And 93% of that money has yet to be spent, meaning its impact could be felt more deeply in the coming months.

“Crypto legislation has become a mainstream issue in the United States, has bipartisan support, and there is real energy in both the House and Senate to pass meaningful legislation,” the company said in a statement.

The company also said it will “continue to invest in policy initiatives to help elect pro-crypto candidates throughout the 2024 election cycle.”

David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrency, and other areas of finance.

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