The cryptocurrency exchange Coinbase said on Thursday that its quarterly profit soared by more than 20 times from a year earlier as its revenue skyrocketed, in a sign of how enthusiasm for digital currencies has gone mainstream in the pandemic.
Coinbase said it brought in $1.8 billion in revenue during the first three months of the year, up from $191 million in the same period a year ago. Profits jumped to $771 million from $32 million. It was the company’s first earnings report since it went public last month.
But Coinbase also offered a cautionary note, saying that rivals were swarming the market and increasing competition. The company has been spending heavily on marketing and development to keep ahead of its competitors.
“The rapid expansion of the cryptoeconomy also creates challenges for Coinbase,” it said in a letter to shareholders. “We also have to continue to move quickly to address them, and that inspires us toward action and growth.”
Coinbase, one of the world’s largest cryptocurrency enterprises, was valued at $85 billion last month when it went public. Its listing was a major milestone for an industry that had long been derided as too risky or unsafe for mainstream investors. Coinbase makes it easy for customers to buy and sell digital currencies like Bitcoin, and it takes a cut of each transaction.
Bitcoin and other digital currencies have surged in value in recent months as buyers have found new uses for the assets and as a wave of market manias have gripped the financial world during the pandemic. That surge has also driven growth and profits for Coinbase. It said Thursday that 56 million people were verified on its platform, up from 34 million a year earlier.
But Coinbase’s share price has dropped as cryptocurrencies have fallen from their highs and its market capitalization now stands at $53 billion. On Wednesday, Elon Musk, chief executive of Tesla and a vocal cryptocurrency supporter, tweeted that Tesla would stop accepting Bitcoin as payment for cars, citing environmental reasons, and Bitcoin’s value dropped. One Bitcoin was worth under $50,000 on Thursday, down from more than $63,000 in mid-April.
Coinbase has also faced criticism as it has grown. Customers have said the company has ignored their pleas for help when their digital fortunes were stolen or when they were locked out of their accounts. Current and former employees have also said Coinbase has treated Black and women employees unfairly.
This week, Coinbase said it was increasing compensation for its employees as it tried to stay competitive and reduce uncertainty. Employees will no longer negotiate for salaries when starting at the company, which “can disproportionately leave women and underrepresented minorities behind,” it said in a blog post.
In a call with investors on Thursday, Coinbase executives said they were trying to balance growing the company quickly with being cautious about security and legal risks.
Brian Armstrong, Coinbase’s co-founder and chief executive, acknowledged that some competitors offered a greater variety of digital currencies to buy and sell, saying, “There’s no doubt that we need to accelerate the process by which we review assets.” He promised that Dogecoin, the popular currency that started as a joke, would be available to trade on Coinbase in six to eight weeks.