Coinbase’s third-quarter earnings report, released on Wednesday, did not meet expectations, with the U.S.’s largest crypto exchange failing to achieve projected profit and revenue figures. In response, Coinbase shares dropped nearly 10% on Thursday, hitting a low of $190.
Investors reacted by offloading shares after the company’s revenue reached $1.2 billion, falling short by $60 million of the $1.26 billion anticipated by Wall Street analysts. The company also reported earnings per share of 28 cents, below the expected 41 cents, although it did remain profitable.
These results appear to reflect a general decrease in activity on the platform, where Coinbase generates most of its revenues through trading fees. The reported total trading volume declined by 18% from the previous quarter, and total transaction revenue decreased by 27%.
The trading volume on the platform decreased from $312 billion in the first quarter to $185 billion in the third quarter. Coinbase attributes this decline to the U.S. spot market’s overall downturn and challenging economic conditions, affecting both consumer and institutional users.
CEO Brian Armstrong noted during a call with shareholders on Wednesday that the company has been making significant efforts to diversify its revenue streams away from the volatility of transaction fees, which are highly dependent on market conditions.
Following a previous low of $33 per share last year due to FTX’s collapse, Coinbase has been on a recovery trajectory. Compared to last year, transaction revenue has increased by 98%, and total revenue has risen by 78%, with subscriptions, stablecoins, and Base—Coinbase’s Ethereum Layer 2 network—emerging as crucial business segments.
Base transactions increased by 55% this quarter, and stablecoin revenue has also been on a gradual rise, albeit at a slower pace in the third quarter. Armstrong also communicated to shareholders that subscription and service fees are on course to exceed $2 billion by the end of the year.
Typically, Coinbase’s share price experiences fluctuations in tandem with Bitcoin’s price and the broader crypto market, as higher prices often signal increased demand and transaction volume for Coinbase. This pattern was evident in September when a cut in interest rates by the Fed led to a Bitcoin rally and a 7% surge in Coinbase shares as investors gravitated toward riskier assets like crypto.
However, the market’s response to Coinbase’s latest earnings report suggests this correlation is not absolute, as the company’s share decline coincides with Bitcoin approaching an all-time high. On Thursday afternoon, Bitcoin was trading around $70,500 after surpassing $73,000 earlier in the week.
