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Coinbase Seeks to 'Optimize' Amid Bitcoin Bear Market, Beats Earnings Expectations

Cryptocurrency exchange Coinbase reported a second-quarter loss of $97 million on Thursday, but shares edged up during after-hours trading on better-than-expected financial results.

Coinbase reported a second-quarter loss of $0.42 per share on $708 million revenue, while analysts expected a loss of $0.76 on $634 million revenue.

Compared to the same period a year ago, revenue was significantly down from $808 million. Yet the San Francisco-based firm’s losses were less severe compared to a staggering $4.98 loss per share reported the same time in 2022.

Coinbase’s second-quarter performance marked a dip compared to the previous one, when the exchange disclosed a loss of $0.34 per share on $773 million revenue. The exchange had built on positive momentum towards the end of 2022 despite the collapse of FTX and sinking crypto prices, growing revenue by 22% sequentially.

In a letter to shareholders, Coinbase said the firm’s strong quarter was driven in part by a continued push toward efficiency. The firm highlighted a 50% drop in its recurring operating expenses year-over-year, which includes slashing its headcount by 30% during that span.

“We started this journey of being more financially disciplined about a year ago,” Coinbase’s Vice President of Investor Relations Anil Gupta told Decrypt. “There's definitely headcount reductions, but there's also a lot more efficiency and optimization across the whole company."

Coinbase took in $201 million in interest income during the second quarter, $151 of which came from its revenue-sharing agreement with Circle on USDC reserves. By the quarter’s end, Coinbase said it had around $1.8 billion in USDC on its platform.

Coinbase disclosed trading volume on its platform sank quarter-over-quarter by a substantial amount, to $92 billion from $145 billion. Compared to the same period a year ago, it represented a 57% decline from $217 billion.

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Some analysts predicted this could be the first time that revenue from subscriptions and services—which includes products like staking and interest income earned from assets backing the Circle-issued stablecoin USDC—overtakes transaction revenue.

Coinbase reported second-quarter transaction revenue of $327 million, notably down compared to $665 million a year ago. Revenue from subscriptions came in at $335 million, up from $147 million a year ago yet down from $361 million in the first quarter.

The Securities and Exchange Commission (SEC) sued Coinbase during the second quarter. The agency accused the firm of failing to register as a securities exchange and broker, claiming its staking products constituted unregistered securities as well.

But Wall Street has largely shrugged off regulatory concerns. Coinbase shares were trading at $90.75 when markets closed on Thursday, up from $52—roughly 75%—since the SEC filed its lawsuit against the company on June 6.

Still, it doesn’t hurt that BlackRock seems to have faith in the San Francisco-based crypto exchange. The monolithic asset manager tapped Coinbase as a custodian for its spot Bitcoin ETF on June 15, later revising its filing to include the exchange in a surveillance-sharing agreement as it vies against other firms in a race to get a spot Bitcoin ETF approved by the SEC.

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