Sunday, November 28

Coinbase stock falls after 75% drop in net income in Q3

America’s leading cryptocurrency exchange, Coinbase, recorded a 75% drop in its net income in the third quarter of 2021, compared to its performance in the second quarter of 2021.

The firm’s profits in the third quarter totalled $406 million, marking a 74.7% decrease in profit compared to the previous quarter, where the firm generated $1.61 billion. The firm also reported earnings of $1.62 per share, which came in 10% short of the FactSet consensus estimate.

Investors reacted negatively to the news as shares of Coinbase, going by the ticker COIN, began to decline in the pre-market skirmish, as the report failed to reach the consensus analyst estimate of $1.61 billion by 22.98%, according to FactSet, as the firm reported revenue of $1.24 billion.

What you should know

Coinbase posted $1.1 billion in transaction revenue in the third quarter, down from about $1.9 billion in the second quarter. Its Q3 trading volume was $327 billion, down from $462 billion in Q2.

Coinbase had 7.4 million retail monthly transacting users (MTUs) in Q3, down from 8.8 million in Q2, but up from 2.1 million in the year-ago quarter.

Coinbase reported that the percentage of total trading volume coming from bitcoin declined, falling to 19% from 24% in Q2 and 39% in Q1. Ether trading volume also dipped from 26% of the total in Q2 to 22% in Q3.

Meanwhile, trading volume for other crypto assets rose from 50% of the total in Q2 to 59% in Q3.

Despite the underwhelming performance in Q3, Coinbase said in the report that it had been a “strong quarter” for the firm, pointing toward deeper investor engagement on the platform and the development of new products such as its upcoming NFT marketplace.

The firm stated, “Coinbase is not a quarter-to-quarter investment, but rather a long-term investment in the growth of the crypto economy and our ability to serve users through our products and services. We encourage our investors to take this point of view.”

Recall that CEO Brian Armstrong first highlighted the firm’s issues with the SEC in September stating that when the firm wanted to launch its USD Coin (USDC) lending program, the SEC threatened to sue them. However, Armstrong said on the Q3 earnings call that he had a “very productive” meeting with SEC chairman Gary Gensley last week.

The firm posted a 41% growth in subscription services revenue of $145 million compared to Q2 via such avenues as its ETH 2.0 staking program, custodial fee revenues and token rewards. The firm also noted that its 7.4 million Monthly Transacting Users (MTUs) are beginning to “engage beyond crypto’s first use case.”

It stated, “Approximately 28% of our retail MTUs both invested and engaged with at least one other product in Q3. Further, 49% of our retail MTUs engaged with non-investing products such as Staking, Earn, and Coinbase Card, including 2.8 million users who were earning yield on their crypto assets.”

As of the time of this writing, COIN is down 11.94% in pre-market skirmish and it is set to open at $315.83 from $357.39.

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