From Coinbase shareholder letter for fourth quarter and full year 2023:

In 2023, we saw our operational rigor pay off. We achieved our financial goal, launched new innovative products, strengthened our competitive position, and doubled down on our efforts to create momentum for a workable regulatory framework for crypto in the US.

For the full-year, we generated net income of $95 million and positive Adjusted EBITDA in all four quarters, totaling nearly $1 billion – consistent with our financial goal to generate positive Adjusted EBITDA in all market conditions. We diversified our full-year 2023 total revenue base of $3.1 billion by generating $1.4 billion in subscription and services revenue. Meanwhile, our balance sheet strengthened as we increased our total $USD resources to $5.7 billion while simultaneously reducing total debt by 12%.

Beyond the numbers, we accelerated product velocity. We launched Coinbase International Exchange, eligible customers can now access derivative products through Coinbase Financial Markets, launched Base, and we acquired key licenses, registrations or launched operations in 6 new markets. We have improved our existing product suite and laid important foundations for future growth.

In 2024 Coinbase will focus on three main priorities. First, driving revenue through improving our core trading and USDC. Second, driving utility in crypto with experiments in payments using USDC and Base. Lastly, we will continue to drive regulatory clarity for the industry. All told, Coinbase is a fundamentally stronger company today than a year ago, and we are in a strong financial position to capitalize on the opportunities ahead.

We are building a business for long-term growth; Coinbase is financially strong, demonstrated by our Q4’23 and full-year 2023 results. Q4 transaction revenue surged 83% Q/Q to $529 million, primarily driven by higher levels of volatility and crypto asset prices. Q4 subscription and services revenue grew 12% Q/Q to $375 million. 2023 total revenue was $3.1 billion, down 3% Y/Y. Subscription and services revenue grew 78% Y/Y to $1.4 billion in 2023. 2023 net income was $95 million and Adjusted EBITDA was $964 million, up from negative $371 million in 2022. Our balance sheet strengthened as we reduced debt by $413 million and grew our total $USD resources1 by $217 million Y/Y, ending 2023 at $5.7 billion.

We are driving a strong future for crypto by building trusted products. In 2023, Coinbase paired operational excellence with product innovation to deliver a strong year of execution against our product roadmap. We made progress in derivatives by launching Coinbase International Exchange and US derivatives products from Coinbase Financial Markets (CFM). We expanded operations internationally by obtaining licenses or registrations or launching in key growth countries – including Bermuda, Brazil, Canada, France, Singapore, and Spain. On the institutional side, we grew our institutional financing product, launched Coinbase Asset Management, and more recently in January 2024, began playing a key role as custodian for 8 of the 11 Bitcoin ETFs. We reached an updated arrangement with Circle to help expand the utility of USDC. We launched Base, our layer 2 network, which aims to improve speed, lower cost, and integrate developers into the Coinbase ecosystem. Lastly, we updated Coinbase Wallet to make sending crypto as simple as sending a text.

We are driving regulatory clarity and made significant progress in 2023. In 2023, we said regulatory clarity was one of our top priorities, and we are pleased with the progress.  By year end, 83% of G20 members and major financial hubs made progress toward regulatory clarity. Yet in the US, we are still fighting for clarity. In Q4, we advanced advocacy by supporting the $85 million Fairshake Super PAC and its affiliates with the goal of electing pro-crypto candidates in the 2024 election and by supporting Stand With Crypto’s efforts to engage 1 million crypto advocates and help drive pro-crypto policies.  Meanwhile, in January 2024, oral arguments were held for our motion to dismiss in our case with the SEC. While it is very hard for defendants to entirely dismiss a case at this stage, we are prepared for all outcomes, and view all next steps as a positive path forward. Our goal is regulatory clarity. Clarity is the win.

2023 transaction revenue was $1.5 billion, down 36% Y/Y.

Total trading volume2 was $468 billion, down 44% Y/Y. Consumer trading volume was $75 billion, down 55% Y/Y, and institutional trading volume was $393 billion, down 41% Y/Y. The primary driver of these Y/Y declines was multi-year lows in crypto asset volatility3, particularly in Q2 and Q3. Over the course of 2023, we gained market share in spot trading through delivering trusted crypto products and benefiting from our long-term approach to compliance and regulation. In Q4, we saw a sharp increase in crypto asset volatility – which resembled Q1’23 levels – and crypto asset prices. We believe the increases were driven by a variety of factors, principally excitement around Bitcoin spot ETF approvals and broad expectations around improving macroeconomic conditions in 2024, which contributed broadly in the capital markets to ‘risk on’ activity. The Q/Q increase in both of these macro factors positively impacted our Q4 transaction revenue.

Q4 institutional transaction revenue was $37 million, up 161% Q/Q. Institutional trading volume increased 92% Q/Q, in-line with the US spot market. Our strong performance in Q4 was driven not just by improved broader market activity, but also by continued investment in our product offering. Q4 trading volume benefited from strong growth in both Markets – which largely consists of market maker activity – and Coinbase Prime.

The growth in Coinbase Prime volume resulted in a higher blended average fee rate in Q4 compared to Q3.  Strength in Prime volume was driven by stronger market conditions, including the anticipation of Bitcoin ETF approvals – coupled with our widening product portfolio. As of Q4, 33% of the 100 largest hedge funds in the world by reported AUM had chosen to onboard with Coinbase. Also in Q4, we continued to see elevated levels of client onboarding and strong levels of re-activation of large institutional clients across our product suite. We were pleased to see strong growth in clients leveraging our Prime Financing products – including trade financing and portfolio margin.

Source: Coinbase