Coinbase reports profit growth despite bitcoin plunge

Coinbase's profits

Cryptocurrency exchange Coinbase (COIN) reported growth in profits, trading volumes and user numbers, despite the bitcoin price dropping about 41% in the quarter. Coinbase expects trading volumes on its platform to decline.

Coinbase shares were valued at more than $380 on the first day of trading (14 April), but since then the stock has fallen 29%, with a small gain over the past five days. Coinbase shares closed down 3.85% on Tuesday before the report, but were up 0.8% in after-hours trading after the report was released.

The stock's decline over the months has been linked to a fall in the price of bitcoin the largest cryptocurrency by market capitalisation hit a record high of more than $64,000 when Coinbase shares went public, but has since fallen to a one-year low of less than $30000 as of mid-July. On Tuesday, the bitcoin price stood at around $45840.

That fact lowered analysts' expectations for Coinbase's quarterly results (March to June), as bitcoin trading on the company's platform accounted for 39% of total trading volume in the first quarter. Trading in ethereum cryptocurrency accounted for 21%.

Coinbase's second quarter 2021 report

Earnings per share were $3.45. Coinbase posted quarterly earnings of $1.6 billion, up nearly 4900% from a year earlier.

Total revenue was $2.23 billion. The company earns from transaction fees, subscription revenue and services.

Despite the fall in bitcoin, the number of Coinbase platform users making monthly transactions rose 44% to 8.8 million in the second quarter, and trading volume rose 38% to $462 billion compared to the previous quarter.

The greater diversification of crypto assets to trade on the platform, making Coinbase less dependent on the price of any one cryptocurrency.

A second positive development for Coinbase investors was the increase in the share of large, institutional clients among users trading on the platform.

Coinbase said it added 1,000 institutional clients during the quarter.

Chief Financial Officer Alesia Haas said Coinbase was paying close attention to comments from SEC Chairman Gary Gensler, who last week asked Congress for more authority to better oversee cryptocurrency trading, lending and platforms.