Coinbase sees stock gains as nontrading revenues surge during extended cryptocurrency downturn

On Tuesday, Coinbase, the crypto exchange with the second-highest trading volume, disclosed its Q4 2022 earnings, providing both investors and market participants with an up-to-date overview of its finances.

In the final quarter of 2022, Coinbase's total revenue amounted to $605 million, which represents a substantial decline from the $2.49 billion earned in the same quarter the previous year. The revenue generated was insufficient to cover the company's expenses, resulting in a net loss of $557 million for the three-month period on a GAAP basis, or -$2.46 per share, and an adjusted EBITDA deficit of $124 million.

According to data provided by Yahoo Finance, Wall Street analysts had anticipated revenue of $581.2 million and earnings per share of -$2.44, with an adjusted EBITDA of -$201.8 million, driven by 8.4 million monthly transaction users (MTUs).

Coinbase's stock had risen 86% year-to-date before the Q4 earnings report was released. However, despite this rally, the company's per-share value remains significantly below its 52-week high of $206.79.

Coinbase exceeded revenue expectations in Q4 2022 despite a decline in trading volume, which historically generated the majority of its revenues through trading fees. Consumer trading volumes fell from $26 billion to $20 billion, and institutional volumes fell from $133 billion to $125 billion in the same period. The overall crypto market capitalization also decreased by $1.5 trillion, or 64%, during 2022, resulting in a 50% drop in Coinbase's total trading volumes and a 66% decline in transaction revenues year-over-year.

Consequently, Coinbase's Q4 trading revenue declined from $365.9 million in Q3 2022 to $322.1 million. However, the company's subscription and services revenue increased by just over 34% to $282.8 million in the same quarter, providing some positive news.

Despite several catastrophic events in the crypto industry, the number of monthly active developers has more than doubled since 2020 to over 20,000, and major brands like Starbucks, Nike, and Adidas have entered the space, alongside social media platforms like Instagram and Reddit. Although the industry hopes this move will result in greater adoption for product use cases and trading volumes, trading volume for both consumer and institutional users fell quarter-over-quarter for Coinbase.

It remains to be seen if trading interest will pick up in 2023 or if platforms like Coinbase will need to continue looking elsewhere for revenue, such as its subscription service, if users remain hesitant to enter the market.