Coinbase has posted four consecutive quarterly losses since going public in April 2021.

The collapses of multiple high-profile crypto-based companies, leading to regulatory pressure, were claimed to be at the heart of Coinbase’s poor performance.

Coinbase performed better than expected in Q4 and improved upon its Q3 posting.

The ongoing crypto winter has seen the cryptocurrency market cap drop to a low of $1.5 trillion, down from its all-time high of $2.9 trillion.

In its fourth-quarter earnings, released on Tuesday, February 20th, Coinbase addressed the impact of the ongoing bear market, listing high-profile bankruptcies and increased regulatory scrutiny as reasons for its fourth consecutive quarter of losses.

Source: Reuters

The collapse of FTX, TerraUSD, and Celcius Network over the last year forced the hand of regulators, but Coinbase’s CEO, Brian Armstrong, sees this as a positive development.

“Policy is my top priority for this year,” Armstrong said on the earnings call to investors. “Coinbase has an important role to play around crypto education, advocacy, and policy,” he added, referencing his collaboration with US lawmakers. 

US Regulators have stepped up their efforts to crack down on crypto products and businesses in 2023. The SEC recently fined and forced Kraken to halt its staking services. However, there has not been much progress in clarifying or codifying the laws in the US. 

Coinbase expects more crypto regulation in the coming year, both in the US and globally, and believes it should benefit from new lawmaking. The company referenced new legislation in the European Union’s MiCA framework and frameworks for nations such as Brazil and the UK. However, it criticized the US for its “disjointed approach.”

Beating Estimates

Coinbase reported Q4 net revenue of $605 million, $17 million more than analyst estimates of $588 million, and 5% up from $590 million posted in Q3. 

Another area of the business showing positive returns was its subscription and service revenues which grew 34% quarter-over-quarter to $283 million. Subscriptions and services accounted for nearly 50% of overall revenue in Q4, based primarily on interest income, accounting for $162 million.

In contrast, the exchange’s transaction volume has fallen 12% quarter-over-quarter to $322 million.

Compounding these issues, Coinbase has been losing its user market share to competitor Binance. Coinbase’s global user share decreased from 5.9% last November to 4.1% this month, while Binance grew its share over the same period and now accounts for nearly 60% of the market.

On the Flip Side

Armstrong addressed the loss of users on the earnings call, stating that his goal is to grow the company’s global user base to one billion, despite shedding 200,000 users in Q4. 

Why You Should Care

Coinbase is the first cryptocurrency exchange to go public, entering the NASDAQ on April 14, 2021. The company going public was seen as a big step for cryptocurrency adoption into mainstream markets. 

The successes and failures of Coinbase, seen through the lens of its quarterly reports, represent a picture of the overall health of the crypto market to institutional and traditional investors less familiar with the entire industry. 

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Filed under: Bitcoin - @ February 23, 2023 11:30 am