Crypto firms struggle to diversify revenue as trading weakness hits results

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Crypto firms diversify revenue

Highlights

Coinbase third-quarter transaction revenue fell 23% year-over-year to $590 million, with total revenue at $1.22 billion and adjusted EBITDA up 60% quarter-over-quarter to $333 million.
Circle reported reserve income down 8% year-over-year to $658 million, while USDC supply remains flat at $73.9 billion and workforce cut by 5%.
Sector shares dropped significantly in the past five days as crypto prices declined, led by Circle with an 11% fall, highlighting continued revenue cyclicality and margin pressure despite new product growth.

Diversification efforts face earnings pressure

As reported by CoinDesk, Coinbase, Robinhood and Circle are pushing beyond core crypto trading, but their latest earnings underline how exposed they remain to market cycles and softer customer activity.

Coinbase said third-quarter transaction revenue fell 23% from a year earlier to $590 million, with consumer spot trading volume down 9% from the previous quarter and institutional transaction revenue down 8%. Total revenue holds near $1.22 billion, while adjusted EBITDA rises 60% from the previous quarter to $333 million, helped by lower expenses and growth in newer products.

Analysts are divided on whether that progress marks a durable shift. StoneX analyst Mark Palmer says Coinbase's third-quarter results should help challenge the view that the company is mainly a leveraged bet on crypto trading volumes, while Barclays analyst Benjamin Budish warns that reliance on spot crypto trading remains a key challenge despite a broader product range.

Robinhood is also expanding from stock trading into retirement accounts, banking products and other financial services, but weaker crypto trading revenue still shows how difficult it is to reduce cyclicality. Shares of Coinbase, Robinhood and Circle are all down significantly over the past five days, led by Circle with an 11% drop, as crypto prices slide after Tuesday's midterm elections and add to existing pressure on sector activity.

Stablecoins and new products bring growth, but thinner margins

Circle's model is less dependent on frequent customer trading, but it remains sensitive to lower interest rates because it earns income from the cash and Treasury securities backing USDC. Reserve income falls 8% from a year earlier to $658 million, while USDC supply stands at $73.9 billion at the end of September, little changed from a year earlier.

Its reported revenue rises 17% to $865 million, but $182 million of that total comes from presales of tokens for Arc, Circle's new blockchain. Without those sales, revenue would fall about 8% from a year earlier, while the company also cuts its workforce by 5% in its latest earnings statement.

Coinbase's stablecoin business also shows the trade-off between growth and profitability. Revenue from USDC held on its platform rises 16% from the previous quarter with average balances reaching a record $22 billion, but rewards paid to attract and retain those balances increase 9%, leaving stablecoin revenue up just 3% from the previous quarter and down about 16% from a year earlier after those costs.

There are still signs that newer crypto businesses are gaining scale. Circle says USDC transaction volume rises 49% from a year earlier to $13.9 trillion, its payments network reaches $41.3 billion in annualized volume, and the number of wallets holding more than $10 in USDC increases 16%. At Coinbase, daily users of prediction markets rise more than 60% from the previous quarter, and prediction markets plus derivatives now account for about a quarter of transaction revenue.

Even so, margin questions remain. Clear Street estimates Coinbase keeps about 1.5 cents on each prediction market contract routed through Kalshi, with potential to lift that to about 2 cents if it clears those contracts itself, while payments businesses are still too small to produce material revenue. The broader pattern across the sector is that customer adoption is improving faster than dependable profit generation.

Our earlier article on the Nasdaq 100 (NDX) highlighted a sharp selloff and continued downside pressure as the index traded below key short- and medium-term moving averages. It also covered the launch of JQQQ, a blockchain-native fund from Janus Henderson and Centrifuge that aims to broaden digital access to Nasdaq-100 exposure—signaling how traditional market products are increasingly being packaged through blockchain rails even as near-term market momentum remains mixed.

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