Coinbase Reports Better-than-expected Fourth Quarter Earnings

Cryptocurrency platform Coinbase reported its fourth-quarter earnings after the bell on Thursday. The company’s earnings results beat the expectations of analysts. The company, however, issued weak guidance for the first quarter of 2022 and by the end of its call with analysts, its shares were down 5 percent in extended trading.

Coinbase reported earnings per share of $3.32 beating the expectation of $1.85 that analysts had forecasted, according to a Refinitiv survey of analysts.

Revenue recorded for the quarter stood at $2.5 billion compared to $1.94 billion that analysts were looking forward to, according to Refinitiv.

The company also issued guidance for the first quarter which was quite disappointing. The company expects retail monthly transaction users (MTUs) and the total trading volume for the first quarter to be lower than its previous quarter, adding that the reasons for its expectation include decreasing crypto asset volatility and a 20 percent decrease in the cryptocurrency market capitalization quarter to date. Coinbase also expects subscriptions and services revenue to also be lesser than what was recorded in the fourth quarter as a result of a decline in the price of crypto assets.

Retail monthly transaction users (MTUs) was up from 7.4 million in the third quarter to 11.4 million in the fourth quarter. Compared to the first and third where the company recorded a decline, it made a rebound between the third and fourth quarters. Coinbase also reported net income doubling to $840 million in the fourth quarter from the third. It reported $177 million in the same period as the previous year.

It’s been quite a tough few weeks for cryptocurrencies. Although it attained new milestones in 2021, it experienced extreme volatility and ended the year on a weak note. The concerns concerning cryptocurrency that made it suffer some losses include high energy consumption, the constraints that came with the pandemic, rejection from Tesla, China’s crackdowns, etc.

The company’s CEO Brian Armstrong while speaking with analysts via conference call said that the cryptocurrency space could be entering a fresh “crypto winter” – a prolonged bear market. While referring to previous crypto winters, he said that “I don’t expect it to be anything quite that pronounced over time”. Earlier this week, Huobi’s co-founder and CEO Du Jun said that Bitcoin may not see a bull market until 2024.

Coinbase which had earlier informed shareholders in the third quarter that they should consider their investment as long-term because of how volatile its business is, also told shareholders in a letter that this year will continue to be filled with uncertainty for its business. The company wrote that ‘we enter 2022 with even more unknowns, which makes our business all the more difficult to forecast”.

The company’s CFO Alesia Haas while explaining that Coinbase’s stock has largely been tied to the changes in crypto prices said that Coinbase is diversifying its platform and would be launching an NFT platform. NFTs are more stable and operate quite differently from cryptocurrencies. Diversifying into NFT may be the breath of fresh air the company needs at the moment.