Coinbase Global (NASDAQ: COIN) has been in the prediction market space for less than a year, but it’s already one of the fastest-growing segments in company history.
The California-based company, which is the largest regulated cryptocurrency exchange operating in the U.S., reported third-quarter earnings after the close of U.S. markets today, telling Wall Street and investors that its prediction market “surpassed $200 million in annualized revenue” in the September quarter while “daily traders grew 60%+ quarter-over-quarter.”
“Prediction markets see 82% quarterly compound growth since launch: Coinbase prediction markets are one of the fastest-growing products by revenue in Coinbase’s history, creating a new source of growth for the Everything Exchange,” according to a statement issued by the company.
Coinbase offers event contracts through a partnership with a leading prediction market operator.
Coinbase Realizing Prediction Market Benefits
As is the case with some brokerage house rivals that ventured into prediction markets, Coinbase is realizing benefits from event contracts. Those include some evidence that traders who transact in yes/no options matriculate over to spot cryptocurrency.
“Users who trade predictions are also driving incremental spot volume,” said the company.
That funnel is important as Coinbase pursues its Everything Exchange model, which amounts to a one-stop shop for its clients’ financial services needs.
“Using prediction markets to bring traders in and then graduate them into options, futures and retirement accounts is smart from a business standpoint,” notes Dat Ngo, an accountant and financial expert at Vetted Prop firms.
As Coinbase CFO Alesia Haas points out, prediction markets “are adding another revenue stream and are less correlated to crypto volatility.” That’s crucial for the company’s diversification efforts because the investment community has long assessed Coinbase shares as tethered to cryptocurrency market sentiment.
Speaking of Cryptocurrency…
Among non-native prediction firms, Coinbase is a credible contender because the industry is increasingly intersecting with cryptocurrency. Outside of the realm of sports, which remains the biggest volume generator for yes/no exchanges, cryptocurrency is one of the fastest-growing segments. That could bode well for crypto-first firms such as Coinbase.
Coinbase’s comment that prediction market traders also drive “incremental spot volume” is also revealing because it confirms prior industry commentary indicating that many prediction market traders are new to crypto, but when the two concepts are joined under one umbrella, as is the case with Coinbase, those market participants frequently embrace digital currencies in conjunction with event contracts.
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