Coinbase's Prediction Markets Have Become One of Its Fastest-Growing Areas
Coinbase has made prediction markets one of its fastest-growing revenue lines in less than a year. The company says the segment has also boosted its crypto trading and turned its revenue into a source that is less affected by crypto market volatility.
Coinbase Global (NASDAQ: COIN) entered prediction markets less than a year ago, but the segment has become one of the company's fastest-growing divisions. The largest regulated cryptocurrency exchange in the US released its third-quarter results after US markets closed. The company reported that annualized revenue from its prediction market business exceeded $200 million in the September quarter, and that the number of daily active users trading on it rose more than 60% from the previous quarter.
The company said prediction markets have posted a compound quarterly growth rate of 82% since launch. The products are offered as yes-or-no contracts under a partnership with a leading prediction market operator. Coinbase describes this business as a new revenue source for its "everything exchange" model, which aims to bring all financial services under one roof.
According to the company, users who trade prediction markets have also moved into crypto asset trading. This is seen as a funnel that leads users into options, futures and retirement accounts. Finance expert Dat Ngo said this approach makes sense from a business standpoint.
CFO Alesia Haas said prediction markets add an additional revenue stream and are less correlated with the crypto market's volatility. Investors have long tied Coinbase's shares to the mood of the crypto market, so diversification is important for the company. The intersection of prediction markets and crypto could create a positive environment for crypto-focused firms such as Coinbase.
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