BitGo Revenue Halves as Trading Slumps, But Bitcoin Treasury Lifts Profit

BitGo Holdings' third quarter delivered a stark reminder of how volatile a transaction-heavy crypto franchise can be. Total revenue fell to $2.9 billion, down 50.9% year-over-year and 34.1% sequentially, as institutional clients pulled back from trading. Yet the custodian still reported GAAP net income of $44.1 million, aided by a $71.5 million unrealized mark-to-market gain on its corporate Bitcoin holdings.

"The entire market saw a lot of downturn. You saw that from the announcements from other companies in the space as well," CEO Mike Belshe told analysts on the call. "On the assets under custody, would have liked to have seen it a little bit higher than it was, but it's not terrible."

Key Financial Metrics

The profit headline was something of an accounting mirage: strip out the Bitcoin mark, and BitGo lost money on an adjusted basis. Adjusted EBITDA came in at a $4.3 million loss, roughly flat with Q2 but a sharp reversal from the $13.5 million profit posted a year ago. The company attributed the decline to lower revenue and compressed margins, partly offset by cost cuts.

Digital Asset Sales Lead the Fall

The revenue collapse was almost entirely a trading story. Digital asset sales, which account for the overwhelming majority of BitGo's top line, fell 52% year-over-year to $2.7 billion.

Trading activity was "weak during the first half of the quarter amid continued low market volatility," CFO Ali Vapra said. Activity picked up in late August, but Belshe noted that roughly two-thirds of clients who traded in Q2 traded less in Q3, with some larger clients shifting to hold positions after prices recovered.

Margin pressure came from mix: digital asset sales margin compressed to 15 basis points from 17 bps in Q2 and 20 bps a year ago, driven by a higher share of lower-margin stablecoin transactions.

Staking revenue fell 24.1% year-over-year, and its take rate tumbled to 5.9% from 9.7%, reflecting a greater contribution from a large institutional client with a lower contractual fee. Stablecoin-as-a-Service was the lone bright spot on a year-over-year basis, up 52.5% to $37.4 million, though it slipped 3.8% sequentially on a 6% decline in average reserve balances.

Balance Sheet and Capital Returns

Assets on platform exceeded $83 billion at actual September 30 prices, though reported assets declined from $65.2 billion to $59.9 billion due to lower median prices used in quarterly calculations. Normalized assets on platform edged up to $59.9 billion from $59.6 billion.

NYDIG, goStocks, and the Go Network

With no formal guidance offered, management leaned heavily on its long-term growth narrative. The August 27 acquisition of NYDIG's institutional trading business launched BitGo Global Markets, adding derivatives, structured products, and financing. Vapra said the bulk of NYDIG revenue will land in digital asset sales, with a small piece in subscriptions and services from fund management.

"We're expecting them to provide significant contributions in 2027," Belshe said.

Chief Revenue Officer Chen Fang outlined the goStocks tokenized-equities push, noting BitGo was the only qualified custodian on the Canton Network and supported custody, delivery, and settlement of tokenized U.S. Treasury collateral in DTCC's live repo workflows.

Belshe framed the opportunity in scale: "The crypto market is a $2 trillion total market cap, whereas the capital markets are about $70 trillion in size." He added that payments and stablecoins represent "the entire banking arena."

On the Go Network, Belshe was candid about the near-term economics: "As of today, we're not expecting significant revenue from that, but over time, it'll change."

Q&A: Analysts Press on Clients, Margins, and CLARITY

Analysts zeroed in on the disconnect between client growth and revenue. BitGo reported over 6,600 clients, though Belshe acknowledged "a discrepancy in how it had been counted before." He described onboarding as seed-planting: "Each client comes on, it is like planting a seed."

On regulation, Belshe was blunt about the stalled CLARITY Act: "I don't think CLARITY is going to happen anytime soon, so I think we're going to have to live without a legislated market structure." He argued the industry must demand risk mitigation commercially, pointing to BitGo's decade-old trust bank charter as a competitive moat.

Asked about the SEC's proposal to let RIAs self-custody crypto, Belshe was measured: "I suppose it's a bit of an opportunity," but cautioned RIAs are "a really federated group" that is hard to reach and will likely start with ETFs.

On M&A, Belshe said there are "a lot of companies for sale" but "a lot of weak companies out there." With BitGo's stock under pressure, he said the company "will be conservative."

Addressing the Binance hack, Belshe offered sympathy and hinted at opportunity: "We have not been able to announce them yet, but I suspect there will be significant announcements in the coming months."

The quarter ultimately hinges on a single question for investors: whether trading activity recovers before BitGo's new initiatives — NYDIG, goStocks, and the Go Network — can meaningfully diversify a revenue base still overwhelmingly tied to the crypto market's mood.

Earnings Call Transcript

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