Coinbase (COIN) Posts Third Consecutive Quarter of Gains Despite Falling Crypto Prices

Net income rose to $36 million, compared with a net loss of $97 million a year ago. Net sales more than doubled to $1.4 billion.

Coinbase (COIN) reported a third consecutive quarter of gains on Thursday, despite a drop in crypto prices during the second quarter.

Net income rose to $36 million, compared with a net loss of $97 million a year ago. Net sales more than doubled to $1.4 billion. Analysts had expected sales of $1.42 billion and a net loss of $1.14 a share, according to Refinitiv.

Shares of Coinbase rose in after-hours trading after falling more than 5% during the regular session on Thursday. Year-to-date, the stock price of the largest U.S. cryptocurrency exchange is up more than 20%.

Coinbase’s results were again impacted by a fairly recent accounting change that requires the company to value its crypto holdings based on period-end prices.

That worked to its advantage in the first quarter, when Coinbase posted a pre-tax profit of $737 million as prices rose. Bitcoin (BTC-USD) hit an all-time high of nearly $74,000, largely on the excitement surrounding the launch of a series of new bitcoin ETFs.

But in the second quarter, as bitcoin’s price fell 12%, Coinbase took a $319 million write-down on the value of its digital assets. Crypto trading volume also fell.

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

MicroStrategy (MSTR), the world’s largest publicly traded holder of bitcoin, also wrote down the value of its crypto holdings for the second quarter, recording a $180 million write-down and a net loss of $102 million.

Shares fell more than 6% on Thursday and continued to fall in after-market trading. It is still up more than 130% this year so far.

Coinbase also saw plenty of bright spots in the second quarter.

The company reported higher-than-expected revenue from transaction fees, subscriptions and service activities.

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 expects subscription and service revenue to be between $530 million and $600 million in the third quarter.

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

Custody fees, which the company earns in part through partnerships with several new bitcoin ETFs, also rose 7% from the first quarter, doubling from the same period last year to $34.5 million.

The company could gain more from a new series of ETFs that include the world’s second-largest cryptocurrency, Ether (ETH-USD), which launched last week.

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

“We are very pleased with our results, despite the continued volatility of crypto and the volatile market we always find ourselves in.”

The story continues

Coinbase still faces some regulatory issues despite some progress being made.

The biggest headache for the company is a lawsuit filed by the Securities and Exchange Commission in 2023, accusing the company of violating U.S. federal securities laws.

Coinbase and its CEO, Brian Armstrong, dispute these allegations. The critical case could take years to resolve.

The company is also trying to influence how the US regulates crypto by building a lobbying pool during a crucial election year.

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

And 93% of that money has not yet been spent, meaning its impact could be felt for months to come.

“Crypto legislation has become a hot topic in the US and has bipartisan support. There is a lot of energy in both the House and Senate to pass meaningful legislation,” the company said in a press release.

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

David Hollerith is a senior reporter for Yahoo Finance, writing about banking, crypto, and other financial topics.

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