The largest US cryptocurrency exchange, Coinbase Global Inc., reported a $557 million loss and saw revenue drop 75% in the fourth quarter as trading volumes fell due to a number of high-profile industry bankruptcies and scandals.
Although the $629 million in sales for the three months that ended in December above the $581 million average analyst expectation, it was still just about 25% of the $2.5 billion earned during the same time last year. The business said in a statement on Tuesday that the loss, which amounted to $2.46 per share, was in contrast to nett profits of $840 million, or $3.32, in the 2022 quarter. Estimates for trading volume were off. Between $300 million and $325 million is what the company projects its subscription and services revenue to be in the first quarter.
This was Coinbase’s fourth straight loss as a result of the extraordinary price swings in cryptocurrencies. After firing 18% of its personnel in June of last year, the company reduced its workforce by 20% in January. 2023 will be a year of regulatory scrutiny, Coinbase noted in an investor letter on Tuesday, and “we believe our strong foundation will make us a nett benefactor of this new environment.” According to Coinbase, it is working towards increasing adjusted Ebitda, a metric of profitability before some costs.
On the earnings call, Coinbase’s CEO, Brian Armstrong, stated that the business has changed from operating with a goal of roughly breaking even throughout cycles to aiming for generating “adjusted Ebitda in all market circumstances.”
Alesia Haas, the chief financial officer, was asked about the possibility of additional layoffs in an interview. The company anticipates having roughly 3,650 employees, not a significant increase in personnel.
More Layoffs Might Yet Happen at Coinbase to Strengthen Financials, CFO Says
Since cryptocurrency prices have risen recently, Coinbase has witnessed a rise in trading activity, which is directly related to their core trading fees, but it is now dealing with growing uncertainty. Following previous regulatory moves against competitors, a number of its more recent operations, like stablecoin revenue and staking, where users receive yields on coin deposits, may come under regulatory scrutiny.
According to its annual report, which was made public on Tuesday, Coinbase hinted that it would take legal action if regulators find that a cryptocurrency on its platform is a security.
Coinbase’s chief legal officer, Paul Grewal, discussed the difficulties in registering cryptocurrency goods with the SEC.
During the results call, Grewal stated that Coinbase was “very open and willing to seek a road to registration when one is made accessible.” “I believe it’s accurate to state that as of right now, there is no open, or at the very least, not simply accessible, avenue for registering goods and services that may be considered securities. It has thus far shown to be difficult.
According to CryptoCompare, its market share has also been declining, falling from 5.9% in November to 4.1% in February. According to the researcher, Binance, the largest cryptocurrency exchange in the world, increased its market share to about 60% in February. In the investor letter, Coinbase claimed that it increased its market share for overall trade volume during the fourth quarter.
The platform’s assets decreased to $80 billion, a 71% decrease from the previous year. According to David Trainer of New Constructs, “it’s a brokerage firm at the end of the day, and if you don’t have the assets, you don’t have the business.”
While trading volumes increased due to a rebound in cryptocurrency prices, Coinbase’s shares have increased by roughly 75% so far this year. Once the fourth-quarter data were announced, the stock fluctuated and fell 85% in value the previous year.
According to Owen Lau, an analyst at Oppenheimer & Co., “I anticipate that the stock should trade favourably because of the favourable outlook” brought on by expense containment and an increasing revenue trend.
