Crypto exchange Coinbase has reported a significant reduction in net loss during the first quarter of 2023, as robust earnings from retail investor trading activity helped boost revenues.
Coinbase significantly reduced its net loss in Q1 2023, dropping from $557 million in the previous quarter to $79 million. This was partly due to robust earnings from retail investor trading activity, which helped increase revenue by 22% to $736 million.
The results surpassed analysts’ expectations, leading to a 9% rise in Coinbase’s share price during after-hours trading.
According to Coinbase’s May 4 shareholder letter, transaction revenue, including fees charged for trades, from its institutional base surged by 66% to over $22.3 million. Meanwhile, transaction revenue from retail investors increased by 14.1% to $352.1 million. Transaction revenue rose by 16% quarter-on-quarter to $375 million, although trading volumes remained relatively flat.
Interest income and blockchain rewards from staking were the primary revenue drivers for Coinbase in the quarter, bringing in $240.8 million and $73.7 million, respectively, an increase from Q4 2022. Bitcoin and Ether trades remained the most significant revenue contributors, accounting for nearly identical percentages of revenue at 36% and 18%, respectively.
Coinbase’s latest quarterly report showed a year-over-year decline in trading volume and less active customer engagement, measured by monthly transacting users (MTUs).
The company’s Q1 2023 report revealed that MTUs averaged 8.4 million, a drop from the 9.2 million recorded during the same period in the previous year. However, the figure indicated a slight increase compared to its 2022 average of 8.3 million.
The firm said the first quarter represented a “turning point” towards building a more efficient and financially disciplined company. The firm reduced costs, doubled down on operational excellence and risk management, and continued to drive product innovation and regulatory clarity.
Coinbase sees progress toward profitability despite challenges
Despite facing significant challenges in 2022, including net losses of $1.16 billion, $803 million, $576 million, and $605 million in each respective quarter, Coinbase has been steadily progressing toward profitability.
Coinbase CEO Armstrong expressed satisfaction with the company’s progress, stating that their efforts have yielded meaningful results and innovative solutions. The company took measures to ensure operational efficiency, including staff reductions of 18% in June and 20% in January.
Coinbase made these remarks in response to the Wells notice from the United States Securities Exchange Commission. Despite this challenge, the company remains committed to advocating for a rules-based crypto industry and is encouraged to see growing bipartisan support for upcoming crypto legislation.