As markets closed last week, Coinbase (NASDAQ: COIN) reported a 23% year-over-year drop in third-quarter transaction revenue, a stark figure that underscores a persistent challenge for crypto firms: expanding beyond trading has not insulated them from the industry’s boom-and-bust cycles, CoinDesk reported.
The latest earnings from Coinbase, Robinhood (NASDAQ: HOOD), and Circle reveal a complex narrative of growth and strain. While these companies are aggressively moving into stablecoins, payments, and prediction markets, their financial performance remains tightly coupled to the volatility of the underlying crypto market. This duality is playing out as crypto prices slide following Tuesday’s midterm elections, adding pressure on an industry already grappling with a trading slowdown.
The Bottom Line
- Coinbase’s Q3 transaction revenue fell 23% YoY to $590M, despite a 60% quarter-over-quarter increase in adjusted EBITDA, driven by cost cuts rather than stronger trading.
- Circle’s reserve income declined 8% to $658M due to lower interest rates, and its reported 17% YoY revenue growth was heavily reliant on $182M from token presales.
- Newer products like stablecoins and prediction markets are growing but offer thinner margins and face competitive headwinds, failing to create a durable, recession-proof revenue stream.
How Cyclical Troughs Expose Business Models
The firm’s third-quarter consumer spot trading volume dropped 9% from the previous quarter, and institutional transaction revenue fell 8%. Yet, the company managed to hold total revenue near $1.22 billion.
Coinbase increased adjusted EBITDA by 60% from the previous quarter to $333 million. This was achieved primarily through lower expenses, not a resurgence in trading activity. Palmer wrote in an Oct. 30 note, suggesting the results “should help to dispel the notion that the company is simply a leveraged bet on crypto trading volumes.” He pointed to record USDC balances and prediction markets generating over $200 million in annualized revenue as signs of a more diversified business.
Barclays cut its price target to $120 from $149, citing a weak fourth-quarter outlook. The firm’s expansion into custody, stablecoins, lending, and prediction markets has created new revenue avenues, but it has not eliminated the cyclical nature of crypto trading.
The Stablecoin Paradox: Volume vs. Margin
For Circle, the firm behind the USDC stablecoin, the reality is more nuanced. Circle’s reserve income, which it earns on the cash and Treasury securities backing USDC, fell 8% from a year earlier to $658 million, a direct consequence of lower rates.
Even as USDC usage grows, it’s not translating into proportional profit. Circle reported that USDC supply stood at $73.9 billion at the end of September, a figure that was nearly identical to the level observed a year prior. Its headline revenue looked stronger, rising 17% to $865 million. But a closer look reveals that $182 million of that revenue came from presales of tokens for Arc, Circle’s new blockchain. Without those one-off sales, revenue would have fallen approximately 8% year-over-year.
The same margin pressures are evident at Coinbase. While USDC transaction volume on its platform rose 16% from the previous quarter to a record $22 billion in average balances, the rewards Coinbase pays to attract and retain those balances also increased by 9%. After accounting for these rewards, Coinbase’s stablecoin revenue grew a mere 3% from the previous quarter and fell about 16% from a year earlier. As Owen Lau noted, “Stablecoins remain the most durable franchise in the model, but each marginal USDC dollar arrives at a lower margin.”
New Products, Old Problems
Prediction markets represent another frontier for growth. At Coinbase, prediction markets have become a source of growth. This segment, along with derivatives, now accounts for about a quarter of the company’s transaction revenue. Palmer estimates that approximately 60% of Coinbase’s net revenue now comes from activity that is either recurring or not directly tied to spot crypto trading.
Yet, these new businesses carry their own challenges. Clear Street estimates Coinbase keeps only about 1.5 cents on each prediction market contract it routes through Kalshi. While developing its own clearing business could potentially increase that margin to about 2 cents, Coinbase has not yet announced a timeline for this move. Payments, another area of expansion, remain a small contributor to the company’s revenue, with Clear Street noting the business has yet to produce material revenue.
The competition is also changing. The rise of Real World Asset (RWA) stablecoins, which offer yields of 5-7% from real credit instruments, is beginning to pressure the yields on traditional crypto-native products like USDC, where the effective yield has compressed to around 4%. This dynamic could force platforms like Coinbase and Circle to innovate further to attract capital.
| Company | Q3 2026 Transaction Revenue (YoY) | Key Growth Product | Margin Pressure |
|---|---|---|---|
| Coinbase (COIN) | -23% | Prediction Markets | Rising rewards on stablecoin balances |
| Robinhood (HOOD) | Not specified | Retirement Accounts | Not specified |
| Circle (CRCL) | Reported +17% (excludes presales: -8%) | USDC Payments Network | Falling reserve income from lower rates |
What the Market Is Saying, and What It’s Not
While Oppenheimer’s Rayna Kumar raised her price target, citing growth in stablecoins and prediction markets, Compass Point’s Ed Engel cautioned that these new products, while growing, carry lower profit margins. Barclays, for its part, cut its price target, citing a weak fourth-quarter outlook.
The stock prices of all three companies—Coinbase, Robinhood, and Circle—are down significantly over the past five days, with Circle falling the most at 11%.
“The crypto market’s cyclical trough is doing what troughs do: revealing which businesses have built something durable.” Palmer, via CoinDesk
The industry has found new ways to grow, but as the latest earnings make clear, making a reliable profit from them remains a work in progress.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
