Crypto exchange Coinbase’s latest earnings report fell short of analysts’ expectations as traders retreated amid the market downturn.

Photo by Viacheslav Bublyk on Unsplash

The crypto exchange – the largest in the US by trading volume – on Thursday reported quarterly revenues of $590 million, far lower than the $641 million that analysts expected and 44% lower than last quarter. 

Coinbase, which makes the bulk of its revenue from trading fees, told shareholders that transaction revenue was “significantly impacted by stronger macroeconomic and crypto market headwinds, as well as trading volume moving offshore.”

The exchange said traders preferred to “HODL” in the bear market rather than trade – something that points to their “long-term conviction in crypto.” Still, the value of assets held on the platform, $101 billion, is down 63% from Q4 2021, when the exchange held $278 billion worth of assets and Bitcoin hit an all-time high.

Coinbase also blamed US regulators for its tough quarter, saying they “create an incentive for crypto developers and issuers to leave the US crypto industry.” In 2021, the U.S. Securities and Exchange Commission threatened to sue Coinbase over its plans for interest accounts. 

For the first time, Coinbase’s trading fees came predominantly from Ethereum, not Bitcoin. ETH made up a third of the total trading volume – a 50% jump from last quarter – while BTC accounted for 31%. 

While Coinbase’s transaction revenue fell, its interest income tripled from $32.5 million in Q2 to $101.8 million in Q3. The massive increase could come from USDC, the U.S. dollar stablecoin that Coinbase runs together with Circle. 

While interest rates rise, Coinbase and Circle can spend the dollars they receive to mint USDC on interest-bearing assets, like treasury bills. Jeff Roberts, the editor of Fortune Crypto, said the increased income could help Coinbase weather the bear market.

Shares in Coinbase closed before the earnings report at $55.80, down from highs of $65.99 on Wednesday. At press time, during pre-market hours, shares in COIN trade for $58.25, an increase of almost 5% since the market closed yesterday.