Executives predicted that the acquisition was going to be a boon for Coinbase’s bottom line as the company continues to diversify its revenue. “It’s been consistently profitable,” Emilie Choi, the exchange’s COO, said on a Thursday earnings call, in reference to Deribit. “It strengthens our business by giving us market leadership within options, which we expect to grow, and enhances the profitability.”
But Coinbase’s predictions of enhanced profitability coincided with a steep drop in profits in the first quarter. Its net income plummeted quarter-over-quarter by 95% to $66 million as crypto trading volume on the platform declined.
But even within the crypto market, Coinbase’s revenue is specialized. Much of it comes from spot crypto trading in the U.S., or traders in the U.S. buying and selling cryptocurrencies based on current prices. Deribit, however, caters exclusively to non-U.S. customers and lets them trade derivatives, financial products that let investors speculate, with leverage, on the future prices of cryptocurrencies.
Its acquisition of Derbit is one of its biggest initiatives far to diversify its revenue in its crypto trading vertical.
Coinbase has been seeking to do the same in other parts of its business. In its first-quarter earnings report, the exchange continued to improve what it calls its “subscriptions and services revenue” by 8% to almost $700 million. The category comprises the money it makes from the interest it reaps on the reserves backing USDC, a stablecoin managed by Coinbase partner Circle. It also includes revenue from its own blockchain Base as well as the fees it nets from custodying customers’ assets.
“We expect Derebit to immediately enhance our profitability and add diversity and durability to our trading revenues,” Alesia Haas, Coinbase’s CFO, said at the end of her prepared remarks on Thursday’s earnings call.
