Coinbase: Tradfi yield polster shrunk by crypto slump

rising interest rates hit global stocks hard and cryptocurrencies even harder. Coinbase, the largest listed US cryptocurrency exchange, felt the pressure on both fronts.

Ironically, earning interest on cash and government bonds-a conventional "tradfi" activity-limits the losses of this would-be finance revolutionary.

falling crypto prices, a smaller user base and a lower trading volume led to a drop in sales of 55 percent in the third quarter. The losses amounted to $ 545 million compared to a profit of $ 406 million in the same period of the previous year. Coinbase warned that the trading volume would go back.

The fate of Coinbase will not turn until the crypto prices recover, which leads to a resurrection of the trade in digital assets. The stock fell by 76 percent this year.

But interest rate increases that have brought growth shares to the ground have a modest silver stripe on the horizon. Interest yields were the rays in the results of Coinbase. This rose from $ 8.4 million a year ago to $ 102 million during the quarter in the middle of the strong increase in interest rates.

The US Federal Reserve increased interest rates this year six times and increased its key interest rate this week from near zero to 3.75 to 4 percent.

Coinbase, a co -owner of USD Coin, together with the issuer Circle, collects the stable coin reserves. It deserves further interest on customers' Fiat credit. Interest income is the company's second largest source of income after transaction -based income.

None of this means that the coin base shares are ready for lifting. The main business of the company - the crypto trade - remains in the doldrum. Token like Bitcoin and Ether have lost about 70 percent of their value since their all -time high last year.

To survive the downturn, Coinbase has reduced the costs, including the staff. It searched for new sources of income and closed partnerships with companies such as Blackrock.

According to consensus forecasts, the company will make losses this year and in the next two years. The interest income will cushion the blow.