November 30, 2022
Decline In Q3 User Activity Results In A 44% Plunge In Coinbase Transaction Revenues

Decline In Q3 User Activity Results In A 44% Plunge In Coinbase Transaction Revenues

Even though trading activity decreased due to a general market downturn in the third quarter, cryptocurrency exchange Coinbase managed to reduce its losses from the previous quarter by half.

The company reported that transaction revenue had dropped from $655.2 million in the second quarter to $365.9 million, a decrease of 44%, in its shareholder letter published on Thursday. 

The company attributed the decline to poor macroeconomic conditions, with daily average crypto market capitalization falling 30% and trading volumes shifting outside of the United States due to unclear regulatory frameworks.

Additionally, it attributed the numbers to increased retail customer holdings during the bear market while advanced traders used other platforms and more complex products.

Brian Armstrong, the CEO and co-founder of Coinbase, sounded upbeat during the Q3 earnings call despite the dismal numbers, saying that the regulatory environment might be one of the “biggest unlocks” to the industry’s growth and might even allow “prices to go back up.”

“I think there’s an opportunity for the crypto prices to decouple from the broader macro environment. And we don’t know if that’s going to happen, but it’s one of the possibilities, and regulatory clarity could help kick that off.

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Alesia Haas, chief financial officer at Coinbase, was also questioned about the likelihood of positive earnings in the last three months.

Haas retorted that it wasn’t their main focus and that they were trying to invest for growth while limiting losses throughout the cycle. 

“When we’re in bull runs, we’re going to make a profit; when we’re in downturns, we’re going to take prudent losses,” Has added.

With the recent earnings report that showed that they could cut operational costs by 38% from the prior quarter via staff reductions and other steps, Coinbase appears to have been effective in that goal.

Coinbase’s Q3 revenue was $576.4 million, down 28% from Q2; however, its net loss was $544.6 million, down 50% from the previous quarter.

According to Coinbase, the revenue decline was partially offset by a 43% uptick in subscription and services revenue, which comes from its staking and custody services and interest income.

The firm’s revenue for the quarter came in below Bloomberg expectations of $649.2 million, which has caused Coinbase shares to decline by more than 8% throughout the day’s trading.

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