Oct 29 (Reuters) - Cryptocurrency exchange Coinbase Global returned to profitability on Thursday after three consecutive quarters of losses, aided by lower operating expenses and investment gains on crypto assets that offset weaker trading activity.
The results underscore the company's continued exposure to swings in crypto asset prices, with gains in the value of its investment portfolio helping boost earnings even as challenging market conditions weighed on trading volumes and transaction revenue,
its largest source of income.
Transaction revenue dropped 43% to $590.2 million in the third quarter, from $1.05 billion a year earlier.
Shares of the crypto exchange were down 2.55% in trading after the bell. The stock has declined nearly 29% since the start of this year.
The company said macro headwinds have begun to shift and crypto prices rebounded in September.
Prediction markets emerged as another area of growth for Coinbase during the reported quarter, with revenue exceeding $200 million.
The expansion also reflects its strategy of diversifying revenue streams beyond its core transaction business, which remains heavily dependent on crypto-market activity.
"They (Coinbase) also treat the category (prediction markets) as near-term revenue, with derivatives as the longer bet," said Colby Howard, president of Heron Events at Heron Intelligence.
"They also see prediction markets as a way in, with traders who start making money moving up to the paid tier."
Total operating expenses in the third quarter fell about 17% to $1.15 billion, compared with $1.39 billion in the prior year.
Revenue at the world's largest cryptocurrency exchange fell about 35% to $1.22 billion in the third quarter.
The company reported a profit of $718.7 million, or $2.51 per share, for the quarter ended September 30, compared with $432.6 million, or $1.50 per share, a year earlier.
(Reporting by Rishab Shaju and Prakhar Srivastava in Bengaluru; Editing by Pooja Desai)
