Coinbase Betting Big On Staking Ahead of Ethereum Merge

Facing a slump in cryptocurrency prices on one hand, and less revenue from user transactions on the other, Coinbase CEO Brian Armstrong said the company isn’t focused on turning a profit. It’s focused on staking.

“Any given quarter it could be up or down,” he said of the crypto market on Coinbase’s most recent earnings call. “It’s important to distinguish between what is in our control and what’s out of our control.”

The chill of crypto winter has cooled interest in trading digital assets from both retail and institutional investors. The trading volume on Coinbase fell by over 50% when compared to the same quarter from a year ago, down to $217 billion from $462 billion.

On the company call, Coinbase CFO Alesia Haas admitted that when facing headwinds, “investors tend to shift from traders to hodlers.” But, she said, the number of monthly transacting users is still up by 200,000 in the recent quarter compared to the same period from last year.

Coinbase Posts $1 Billion Net Loss in Q2, Stock Tumbles

In its shareholder letter, Coinbase pointed out that it is keeping users around by offering them the ability to stake crypto, writing, “As a result of our core retail customer trading less, our [monthly transacting user] mix has trended more towards non-investing activities—notably staking.”

Staking is the process by which investors earn interest on crypto by loaning it out to validate transactions on a network’s protocol. It enables validators on proof-of-stake networks to operate, secure the network, and process transactions.

According to the letter, the exchange considers its staking product to be an “early win” for the company. It also mentions that staking is one of Coinbase’s prioritized products, with a long-term goal of becoming the number one staking provider among companies involved in crypto.

Coinbase offers staking rewards for tokens including Ethereum, Algorand, Cosmos, and Tezos. It added Cardano to that list in March along with Solana in June. In the second fiscal quarter of this year, Coinbase said 67% of its monthly transacting users engaged with non-investing products offered by the company, which includes staking.

It did not address specifically how many of its users were staking crypto, but the company stated, “Across all assets we support, [Coinbase] saw higher native units staked in Q2 compared to Q1.”

The company continues to put an emphasis on staking as part of its business model leading up to the Ethereum merge, as the second largest cryptocurrency by market cap makes its long-awaited transition from a proof-of-work validation system for transactions to proof-of-stake.

“In early August, we began offering Ethereum staking for institutional clients for the first time,” the letter to shareholders states. ”We’ll continue to add more assets for staking for both our retail and institutional clients going forward.”

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