2.8 Million Coinbase Users Earnings Yield on Crypto with ETH2 Staking, Driving 109% Surge in Rewards Revenue

After a drop in Q3, in which users traded other cryptocurrencies more than Bitcoin and Ether, Coinbase projects retail MTUs, and total trading volume to be higher in Q4.

Coinbase reported a revenue of $1.24 billion for the quarter ended Sept. 30, 2021.

The leading cryptocurrency exchange in the US reported a drop in its monthly transacting users to 7.4 million, from 8.8 million in the second quarter, though up from 6.1 million a year earlier.

Transaction revenue in the third quarter was $1.1 billion, down from about $1.9 billion in the previous quarter.

Trading volume also fell to $327 billion from $462 billion in Q2. Bitcoin accounted for 19% of this volume, down from 24% in Q2, and Ethereum for 22%, dropping from 26% in Q2. Other crypto assets accounted for 59% in Q3, which is an increase from 50% at the end of June.

During the earnings call, CFO Alesia Haas said, “In lower volatility periods, we see our low-dollar traders become less active,” but at the same time, CEO Brian Armstrong said unlike 3-5 years ago when the crypto market was entirely speculative driven, today it is more driven by utility and adoption of crypto.

49% of our Coinbae’s retail MTUs engaged with non-investment products such as Staking, Earn, and Coinbase Card.

2.8 million users were earning yield on their crypto assets, said the company in its shareholder letter. Blockchain rewards revenue surged 109% to $81.5 million compared to Q2, largely driven by Staking, notably ETH2, which now makes up most of its staked assets.

Preparing For Improved Conditions

Assets on Coinbase jumped to $255 billion from $180 billion at the end of June, with 55% of it from institutional investors.

The company reported its revenue from subscription and services growing 41% quarter over quarter to $145 million, up from $103 million in Q2.

On NFTs, Coinbase said it will launch the platform in the next couple of quarters and sees the potential for NFT business to become bigger than its crypto business.

“We are very excited about NFTs, this is going to be a very large area for crypto in the future, and it already is today,” Armstrong said during the earnings call. “It could be as big or bigger.”

On exchange-traded funds (ETF), Coinbase said it could grow the pie more broadly by onboarding new institutional participants who can't hold a spot. The exchange is also exploring how it can support ETF adoption.

The exchange expects retail monthly transacting users and trading volume in the fourth quarter to be higher than in the third.

“While we entered Q3 with softer crypto market conditions, driven by low volatility and declining crypto asset prices, market conditions improved meaningfully later in the quarter, which we have continued to see into early Q4,” the company said.

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