Coinbase reported that user numbers fell. It fell short of the analysts’ estimates as the 4th-quarter earnings and its revenue beat projections.
The stock increased about 2 percent in the extended trading after falling 4.8 percent in the day. Revenue fell nearly 75 percent from one year earlier when the crypto winter continued to drag the price of crypto-currencies. Coinbase also reported a non-adjusted net loss of dollars 557 million. This was a year after Coinbase had generated a net income of dollars 840 million at the peak of crypto adoption.
The user base of Coinbase continues to shrink
However, the user base of Coinbase continues to shrink. It said it had 8.3 million MTUs (monthly transacting users) in the 4th quarter. This was down from 8.5 million in the previous period. According to StreetAccount, analysts had expected 8.22 million. Trading volume dropped 9 percent to dollars 145 billion from the prior quarter.
Transaction revenue dropped 12 percent to dollars 322 million from the previous quarter. This was below the $ 327 million consensus among analysts polled by StreetAccount. For quarter one in 2023, Coinbase projected subscription and services revenue of $ 300 million to $ 325 million. They also restructure expenses of about $ 150 million. Traction in several products generated above dollars 200 million in the 4th quarter.
Coinbase at present
The company went through 2 major rounds of layoffs since June 2022. This was to cut back spending to preserve cash. The exchange cut 20 percent of its staff in the last month. This followed an 18 percent reduction of its employees in 2022. Before Tuesday, the stock was up above 75 percent in 2023. This was following the year 2022′s drop in crypto costs. This year, bitcoin, the most popular cryptocurrency now, is above 48 percent.
The Chief Financial Officer of Coinbase, Alesia, said the markets rebounded in the present quarter compared to quarter four in 2022. She also said that the market conditions have evolved. Haas noted that Coinbase have generated a dollars 120 million in transaction fee revenue in January.
Haas told that they are watching what they have always seen in crypto. It is overall volatility. The market conditions driving trading activity changed the longer-term dynamic that they have seen.
The business of Coinbase can be impacted by the possible SEC action that shall govern certain types of crypto services and cryptocurrency tokens as securities. Tweets by Paul Grewal (the Chief Legal Officer) and Brian Armstrong (the CEO of Coinbase) suggested that the company would fight any such action in court.
For example, Kraken (crypto exchange) has recently ended its staking services. This is part of the settlement with the SEC over the allegations that the platform has sold unregistered securities.
Now, many centralized exchanges such as Gemini and Kraken offer their customers the option to stake their tokens. This is to earn a yield on the digital assets that otherwise sit idle on the platform.
However, on a call with CNBC News, Haas insisted that the staking product of Coinbase was not a security. Haas also added that staking was less than 3 percent of net revenue. As a result, it was not a material source of the net revenue at present. But, it is an integral part of the ecosystem that the platform plans to grow.