BitGo made $4.3 billion in revenue last quarter, but direct costs swallowed 99.8% of it

BitGo's second-quarter earnings showed $4.329 billion of revenue, but almost all of the sales generated by its largest business line flowed back out as transaction costs.Revenue increased 79.6% from a year earlier, according to BitGo’s second-quarter earnings release. Yet the headline number can obscure the underlying economics: Digital Asset Sales generated $4.198 billion of revenue against $4.190 billion of direct costs.That left a spread of $7.1 million, or 17 basis points of Digital Asset Sales revenue. The measure applies to that segment, not to BitGo’s consolidated margin.BitGo generally records Digital Asset Sales gross when it acts as principal, according to its quarterly filing. Direct costs therefore offset 99.83% of the segment’s revenue in the quarter, making that gross-presented component economically different from net-style software revenue.The distinction mattered below the top line. BitGo recorded a $17.4 million operating loss and a $19.0 million net loss. The net result included an $18.8 million unrealized loss on company-owned digital assets, partly offset by a $5.6 million disposal gain. But the weakness was not only a Bitcoin remeasurement story: BitGo’s compa...