Crypto exchange Coinbase managed to significantly narrow its net loss in the first quarter of 2023, due in part to robust earnings from retail investor trading activity.
The company’s net loss fell from $557 million in Q4 2022 to $79 million in Q1, partly attributed to a 22% increase in revenue to $736 million.
The results beat expectations from some analysts, leading to a 7% spike in Coinbase’s share price in after-hours trading.
Transaction revenue — the fees it charges for trades — from its institutional base increased a whopping 66% to over $22.3 million, while transaction revenue from retail investors increased 14.1% to $352.1 million, according to Coinbase’s May 4 shareholder letter.
Overall, revenue from transactions increased 16% quarter-on-quarter to $375 million, though trading volumes remained fairly flat.
Interest income and blockchain rewards from staking brought in the most revenue for the quarter, which increased to $240.8 million and $73.7 million respectively from Q4 2022.
The percentage of revenue from Bitcoin (BTC) (36%) and Ether (ETH) (18%) trades remained almost identical over the quarter.
The firm is inching closer to profitability following a tumultuous 2022 that saw net losses of $1.16 billion, $803 million, $576 million and $605 million across each respective quarter last year.
Coinbase said that the quarter represented a “turning point” toward building a more “efficient” and “financially disciplined” firm:
“We reduced costs, doubled down on operational excellence and risk management, and continue to drive product innovation and regulatory clarity. Our efforts are showing meaningful progress.”
“Our teams are smaller, but more nimble than ever and we are pleased with the pace of innovation and the results we are seeing,” the firm added.
Coinbase cut staff by 18% in June and then another 20% in January, to ensure that the firm maintains an appropriate level of “operational efficiency,” Armstrong said.
Related: Coinbase International Exchange launches amid SEC crypto crackdown in the US
Coinbase’s comments were made in light of the Wells notice hanging over its head from the United States Securities Exchange Commission:
"We see this as an opportunity to continue pushing for a clear rule book in the U.S. for crypto regulations."
The firm said it is “heartened” to see more bipartisan support for incoming crypto legislation and hopes to play a role in advocating for a rules-based industry.
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