Coinbase reports $1.4B revenue for Q2: How ETFs helped profits

• Coinbase has reported a revenue of $1.4B for Q2 2024.
• The exchange has reported a third profitable quarter.

The growing crypto adoption globally and increased institutional investors mean crypto exchanges are increasing revenues despite crypto volatility.

Inasmuch, Coinbase, the leading crypto exchange platform in the U.S., has released Q2 2024 reports. According to the report, the exchange reported a third consecutive quarter in profits.

Source: Market Screener

Coinbase reports $1.4B in revenue, but 11% revenue decline

In the second quarter of 2024, Coinbase has reported $1.4B in revenue. However, the revenue has declined from the previous quarter.

In Q1 2024, the exchange reported  $1.6b; thus, the recent $1.4b is an 11% decline from the previous quarter.

Source: Y Charts

Notably, the exchange’s  $1.4B revenue left the exchange with $36M in net income. Through its official report, Coinbase shared that,

“Despite our sequential decline in revenue, our profitability was solid in the second quarter. Net income was $36 million and was impacted by $319 million in pretax crypto asset losses associated with our investment portfolio. The vast majority of these were unrealized. “

The report continued,

“These losses represented a $248 million after-tax expense. Our adjusted EBITDA was $596 million, and our balance sheet remains strong, as we ended the second quarter with $7.8 billion in USD resources, up $733 million quarter-over-quarter.”

Over the past months, the 11% revenue decline has arisen from crypto volatility. Equally, the exchange has also experienced lower trading volumes, resulting in revenue drops.

The exchange reported a 27% decline in revenue to $781M, only reporting an increase in service revenue to $599M.

Source: Coinbase

However, the firm’s stock has increased by 64.56% over the past six months, with a 35.54% YTD increase in stock prices.

Despite the release of profitability, in the Q2 report, the exchange stock has declined by 5.22% over the past 24 hrs, with 11.72 as of press time.

Source: Google Finance

Profits from ETFs

Source: Tipranks

Coinbase is the leading custodian for most ETFs, which positions the exchange to benefit greatly from custody fees. For the uninitiated, Coinbase charges 0.2% in custody fees, making it relatively affordable.

With the rise of spot ETFs, Coinbase is the custodian for 10 Bitcoin [BTC] ETFs and eight Ethereum [ETH] ETFs. This has made the platform dominant in the areas, although it’s a small share of the Q2 revenue.

Alesia Haas noted the importance of ETFs, adding that,

“ETFs have been great for our industry. They have really generated a flywheel of activity across our product platform and deeper engagement across the ecosystem.”

Coinbase calls for regulatory clarity

Through the Q2 report, the exchange noted the recent regulation changes with more regulatory clarity, which have become beneficial.

Brian Armstrong noted the significance of regulatory clarity and the need for clear rules and policies. In his statement, he added that,

“90% of institutional investors say regulatory clarity would boost their confidence in investing more in crypto. For these reasons, Coinbase will continue to push for clear rules in the courts, in Congress, and in the November elections.”

Thus, according to the exchange, the U.S. needs to establish clarity, as in the case of MICA in Europe.

Armstrong argued that such clarity is essential and will increase institutional investments and the investments of other big investors. The exchange noted they spent $26M to push for regulatory clarity in Q2.