Coinbase made $719 million in the third quarter. ,That figure included $715 million in gains on cryptocurrency investments.,
Do the math. Four million dollars came from running an exchange. The rest came from holding bitcoin and watching.
,Strip out the gain and its tax effects, and adjusted net income was $78 million., That is a company. The other $641 million is a guy who bought a coin and got lucky.
Revenue tells the real story. ,Total revenue fell 35% year over year to $1.22 billion., Customers traded less. Coinbase got rich anyway, by trading against nobody, which is the only way to win that game.
Brian Armstrong now runs the world's most expensive piggy bank. It oinks quarterly. It has no idea why it just got heavier.
The gain is also unrealized. ,Bloomberg described it as an unrealized gain on the value of its crypto holdings., Coinbase has not sold anything. Coinbase is a man at a casino holding a stack of chips, telling everyone he's up.
The company wants you to look elsewhere. ,Prediction market revenue grew to more than $200 million on an annualized basis., Gambling on gambling. Coinbase is now a bookie for people who find the stock market too dignified.
The chart doesn't care. Bitcoin rose 39% in the quarter. Next quarter it can fall 39%, and this headline will read "net income plunges," and the same analysts will nod gravely at the same weather.
Retail traders will see 66% and buy the stock. They will think they are buying a business. They are buying a bitcoin ETF run by a payroll department.
Congratulations to Coinbase on its record quarter of being right by accident.
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