Extracts from Coinbase shareholder letter:

Q3 was a strong quarter for Coinbase. We drove solid financial results, maintained focus on shipping innovative products, and continued building the foundation of the Everything Exchange.

We laid out our vision of an Everything Exchange last quarter, and made progress in Q3 by increasing the number of tradable spot assets, expanding our derivatives offerings, and continuing to lay the groundwork for additional pillars. By increasing tradable spot assets, our platform now covers approximately 90% of total crypto asset market capitalization. Our derivatives business reached an all-time high share across several markets, including U.S. crypto futures and global crypto options, with the launch of U.S. perpetuals and 24/7 futures trading, and the close of the Deribit acquisition.

We are accelerating payments through stablecoin adoption, which we anticipate will continue given policy tailwinds, and ongoing adoption from financial institutions and corporates for payment and treasury needs. In Q3, USDC reached an all-time high of $74 billion in market capitalization, and average USDC held in Coinbase products reached an all-time high of over $15 billion. Additionally, we continue to scale payments with USDC, new partnerships, and crypto rewards for purchases through the CB1 Card.

With regulatory clarity accelerating, crypto rails are set to power more of global GDP, and we believe Coinbase is positioned to lead. We’re progressing toward the Everything Exchange vision, and scaling payments by advancing stablecoin adoption with USDC.

Results

Total revenue in Q3 was $1.9 billion, up 25% Q/Q. Transaction revenue was $1.0 billion, up 37% Q/Q. Subscription and services revenue was $747 million, up 14% Q/Q. Total operating expenses declined $134 million or 9% Q/Q to $1.4 billion. Technology & development, general & administrative, and sales & marketing expenses collectively increased 14% to $1.1 billion, which includes $30 million attributable to Deribit. Full-time employees increased 12% Q/Q to 4,795. Net income was $433 million, Adjusted Net Income was $421 million, and Adjusted EBITDA was $801 million.

Transaction Revenue

Global crypto market spot trading volumes were up 38% Q/Q, and U.S. crypto market spot volumes were up 29% Q/Q. Total Q3 transaction revenue was $1.0 billion, up 37% Q/Q. Total Trading Volume was $295 billion, up 24% Q/Q, underperforming the spot markets primarily driven by lower volume from stablecoin pairs.

Institutional Transaction Revenue.

Institutional Trading Volume was $236 billion, up 22% Q/Q. Institutional transaction revenue was $135 million, up 122% Q/Q. Several factors drove the increase in revenue, most notably Deribit (closed on August 14), which contributed $52 million of revenue in Q3 driven by continued growth of options trading leading to all-time high notional volumes. Deribit and Coinbase collectively achieved over $840 billion of notional derivatives trading volume in Q3 on the back of innovative new products launched to date. Given the momentum we are seeing across our growing portfolio of derivatives products, we have begun to scale back rebates and incentives (which, as a reminder, is recognized as contra revenue).

Crypto as an Investment:

We are building the most trusted, comprehensive venue to access, price, and execute trades across spot and derivatives, and we’re expanding it in line with our Everything Exchange vision to bring all tradable assets onto a single platform. In Q3, we executed on the foundations of that vision: expanding tradable spot assets (including integrated DEX access), scaling U.S. perpetual futures, adding global options with Deribit, and growing custody.

Spot & Simple Trading: Expanding Access to the Assets Users Want

Adding more assets is consistently among the top requests from customers. In Q3, we added the ability to trade more than 40 thousand assets in the Consumer app via our decentralized exchange (DEX) integration on Base (powered by an integrated self-custody wallet), and we now support approximately 90% of total crypto asset market capitalization for trading on our platform. We believe DEX assets help turbocharge our centralized exchange (CEX) by surfacing early demand and price discovery. When assets meet our standards, they will move to our CEX, where they should benefit from deeper liquidity, faster execution.

Derivatives: Scaling a Durable, Global Business

Derivatives account for ~80% of global crypto trading volume, yet the U.S. market makes up only a fraction of this volume. This presents a significant growth opportunity, and one against which we saw significant market share gains in Q3. In July, we launched first of its kind CFTC-regulated crypto perpetual futures in the U.S., trading 24/7 with up to 10x intra-day leverage, and became the first U.S. regulated futures exchange to offer 24/7 trading in BTC, ETH, SOL, and XRP which together drove our all-time high U.S. crypto derivatives market share.

In August, we closed the Deribit acquisition, bringing the #1 crypto options exchange by volume and open interest into Coinbase and creating the most comprehensive global crypto derivatives offering across spot, futures, perpetuals, and options.

We expanded our international derivatives total addressable market by adding new regulated routes for growth and distribution in Brazil and India

Custody at Scale: Coinbase as the Default Institutional Partner

Assets Under Custody (AUC) reached an all-time high of $300 billion as did share of total crypto asset market capitalization driven by strong inflows from ETFs and Corporate purchases.

In October, we helped bring the first staking ETFs to the U.S. market with long-time partner Grayscale, and continue to be the primary custodian for over 80% of U.S. BTC and ETH ETF assets as of quarter-end.

Source: Coinbase