In its third-quarter results released on Oct. 29, Coinbase, the largest crypto exchange in the U.S. (a company listed on Nasdaq), reported revenue of $1.216 billion, down 35% from a year earlier. Yet net income rose 66% over the same period, to $719 million.
Looking only at net income, it seems like a good quarter for business. But the key point lies elsewhere. Most of the profit came not from fees paid by customers, but from a rise in the value of the crypto the company keeps in its own vault.
- Why did revenue fall 35% in a year?
Coinbase's biggest source of money is trading fees. It takes a fee every time a customer buys or sells crypto, and this trading fee revenue fell 44%, from $1.0463 billion a year earlier to $590.2 million.
The reason is trading volume. Spot trading volume, the crypto actually bought and sold, fell by more than half, from $294.3 billion to $134.5 billion. For a shop whose customers have been cut in half, sales are halved even if it charges the same prices.
- So how did net income rise 66%?
The answer lies in the crypto the company holds as an investment. As of Sept. 30, Coinbase held $2.225 billion worth of crypto, and as its value rose in the third quarter, it booked a paper gain of $715 million (an amount recorded as profit in the books, meaning the company's accounting records, because the crypto's price rose even though it was not sold). The company said the total market capitalization of the crypto market grew 37% from the previous quarter.
If crypto bought for KRW 10 million is worth KRW 13 million at the end of the quarter, the company records a KRW 3 million profit without selling. But it is not cash in hand, so if the price falls next quarter, the same amount is booked again as a loss.
The $715 million paper gain is a before-tax figure, while the $719 million net income is after taxes, so the two cannot be compared exactly. Still, they are almost the same size. Simply put, crypto prices produced most of this quarter's profit.
- How much profit is left without the coin-price boost?
Coinbase separately reports 'adjusted net income', which is net income minus the paper gains and losses on crypto. It is a figure meant to strip out the part from crypto prices and show the profit earned from running the business, and the company said it excludes crypto paper gains and losses including their tax effect. This adjusted net income fell 82%, from $420.7 million a year earlier to $77.7 million.
Adjusted EBITDA, which shows operating profit before interest, taxes and depreciation, also fell 58%, from $800.7 million to $332.9 million. For the same company in the same quarter, the result splits into a 66% increase or an 82% decrease depending on which number you look at.
- If coin prices fall, net income flips
The same accounting worked in reverse from the fourth quarter of 2025 to the second quarter of 2026. In the fourth quarter of 2025, a paper loss of $718 million on crypto led to a net loss of $667 million. In the first quarter of 2026 (paper loss of $482 million) and the second quarter (paper loss of $210 million), net losses were $394 million and $360 million, respectively.
The core business also improved from the previous quarter. Adjusted net income turned from a loss of $104.9 million in the second quarter to a profit of $77.7 million in the third. But most of the $719 million in net income comes from crypto prices. It is like your salary staying the same while the stocks you own rise and your account balance swells. Still, since this crypto was not sold, no cash came in.
- Service revenue fills part of the gap left by fees
New businesses are filling part of the gap. Prediction markets, where people bet money on things that will happen in the future, such as election and sports results, passed $200 million in annualized revenue (revenue calculated by assuming the current pace continues for a year). That doubled from about $100 million in the previous quarter. A Bernstein analyst estimates that prediction markets and derivatives (contracts that bet on a price going up or down without buying the crypto itself) together account for about 25% of trading fee revenue.
Subscription and services revenue (money paid for using a service, rather than fees charged when buying and selling) also rose 3% from the previous quarter to $570.2 million, making up nearly half of total revenue. Still, this revenue is 20% lower than the $716.6 million of a year earlier. Simply put, the money is shifting from 'fees charged when buying and selling' to 'prediction markets and services', but it has not yet made up for the lost fees.
- BITPRESS Insight
A crypto company's net income is a number that mixes two kinds of money. One is fees and services revenue from customers; the other is the rise and fall in the value of the crypto the company holds. This quarter, Coinbase's first kind of money shrank while the second grew sharply, so revenue and net income moved in opposite directions.
This difference changes how a shareholder should judge the stock. Buying because net income rose is effectively a bet that crypto prices will keep going up. Betting on the exchange business instead means the test is whether fees pick up again and new revenue such as prediction markets fills the gap.
If net income rose while revenue and adjusted net income fell, that profit did not come only from the business, and most of it was made by crypto prices. Services revenue provides some support, but if crypto prices fall, this profit turns into a loss.
Sources
https://www.sec.gov/Archives/edgar/data/0001679788/000167978826000121/q326earningsdeck_vsec.htm
https://www.theblock.co/news/business/2026-10-30-coinbase-q3-net-income-jumps-432189
Glossary
Paper gain — An amount recorded as profit in the books because an asset's price rose even though it was not sold; if the price falls, it turns into a paper loss.
Adjusted net income — Net income that Coinbase calculates after removing the paper gains and losses on the crypto it holds (including tax effects), a number meant to show the profit earned from running the business.
Spot trading — A trade in which crypto is actually bought and sold and changes owners.
Derivatives — A contract that bets money on a price going up or down without buying the crypto directly.
Prediction market — A market where people bet money on the outcome of future events, such as election and sports results.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
