When Coinbase Inc. held its third-quarter results call on November 3, it revealed that sales had fallen short of analysts’ projections.
As trade activity decreased, the company’s revenue fell more than 50% from the prior year. Due to this, Q3 2021 had a profit of $406 million as opposed to a deficit of $545 million. The business wrote in a letter to shareholders that:
“Transaction revenue was significantly impacted by stronger macroeconomic and crypto market headwinds, as well as trading volume moving offshore,”
In a bear market, Coinbase’s business model is clearly failing because it derives up to 90% of its revenues from transaction fees that are higher than the industry norm.
Our Q3'22 financial results are in.
Check out our letter to shareholders:https://t.co/JmThnye15x
— Coinbase (@coinbase) November 3, 2022
Coinbase Loses Customers
According to the firm, Q3 transaction revenue was $366 million, a 44% decrease from the previous quarter. However, revenue from subscriptions and services rose by 43% to $211 million. In comparison to Q2, 2021, net revenue for the period fell by 28%.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the company during the time period were a loss of $116 million. Comparatively, the profit for the same period in 2021 was $618 million.
The macroeconomic environment, it was found, reduced trade activity as retail investors shifted to hoarding. In addition, Coinbase claimed that due to regulatory ambiguity and worries, trade activity had shifted away from the United States.
Additionally, the business is losing customers. In the third quarter, Coinbase reported 8.5 million monthly transactional users (MTUs), down from 9.2 million in the first quarter and 9 million in the second.
Trading volume decreased 27% from $217 billion the previous quarter to $159 billion. The overall volume for the time period was made up 33% by Ethereum, which has recently outperformed Bitcoin, and 31% by Bitcoin.
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