San Francisco, CA – Coinbase Global (COIN) experienced a drop in its stock price following the release of its earnings report, revealing a significant decrease in crypto trading volume. Despite a recent surge in COIN shares due to the introduction of crypto futures for eligible U.S. retail customers, the decline in trading activity weighed on investor sentiment. Concurrently, the former FTX CEO, Sam Bankman-Fried, faced legal consequences with a guilty verdict on all seven charges related to the collapse of a crypto exchange.
Coinbase Earnings Report
In its latest earnings report, Coinbase reported a net loss of 1 cent per share, a considerable improvement from the loss of $2.43 per share recorded in the previous year. Total revenue exhibited a 14% increase, reaching $674.1 million, ending a streak of six consecutive quarters of double-digit revenue declines.
Analysts surveyed by FactSet had expected Coinbase to report a loss of 55 cents per share, with revenue growth projected at 10.4% to $651 million.
However, total transaction revenue for the quarter declined to $288.6 million, down from $327.1 million and $365.9 million in the corresponding period a year ago. FactSet’s guidance had anticipated transaction revenue at $276 million.
Consumer transaction revenue amounted to $274.5 million, surpassing estimates of $256 million. Conversely, institutional transaction revenue stood at $14.1 million, falling short of the forecasted $15 million.
Subscription and services revenue reached $334.4 million, demonstrating a nearly 59% increase from 2022, though it remained relatively flat quarter-over-quarter. FactSet had expected subscription revenue to reach $323 million.
Total trading volume for Coinbase dipped to $76 billion in the third quarter, down from $92 billion in the second quarter and $159 billion during the same period the prior year.
Retail trading volume saw a 21% decrease from the previous quarter, landing at $11 billion, marking a nearly 57% decline from the same period in the previous year.
Institutional trading volume also experienced a 17% decline quarter-over-quarter, reaching $65 billion. Notably, Coinbase reported $133 billion in institutional trading volume in 2022.
Coinbase announced that it anticipates flat subscription and service revenue for the fourth quarter, compared to the third quarter, and noted it generated $105 million in transaction revenue in October.
Crypto Futures Launch
Coinbase introduced the trading of futures contracts tied to bitcoin and ethereum for eligible U.S. retail customers on Wednesday evening. These futures contracts enable investors to speculate on future price movements and are agreements to buy or sell an asset or security at a specified price and date. Additionally, Coinbase offers leveraged trading, allowing investors to increase their trading positions with borrowed funds, albeit with higher risk levels.
These futures contracts are designed for retail traders, with bitcoin futures contracts representing 1/100th of a bitcoin and ethereum contracts representing 1/10th of an ethereum token.
The company obtained regulatory approval from the National Futures Association in August, with Coinbase emphasizing that the crypto derivatives market represents approximately 75% of the global crypto trading volume.
Coinbase Stock and Crypto Price Movements
Following the earnings report, COIN stock declined by more than 4% in late trading. However, prior to the report, the stock had rallied nearly 9%, marking its fourth consecutive day of gains. COIN shares have surged by 139% in 2023, largely influenced by the rising prices of bitcoin and other cryptocurrencies, driven by positive regulatory developments and the potential launch of a spot bitcoin ETF.
Bitcoin’s price traded just below $35,000 in late trading, having previously surged to $35,938, its highest level since May. Ethereum, the second-largest cryptocurrency, hovered around $1,800, down from its recent peak of $1,874, while still showing a 50% increase in value for the year.
Grayscale Bitcoin Trust (GBTC), a potential candidate for conversion into a spot bitcoin ETF by Grayscale Investments, saw modest gains, while Bitcoin miner Marathon Digital (MARA) experienced a more than 10% jump in its stock price.
Sam Bankman-Fried Found Guilty
In separate developments, the former CEO of FTX, Sam Bankman-Fried, commonly known as SBF, was found guilty on all seven criminal charges for his involvement in the collapse of a cryptocurrency exchange last year. The verdict was delivered after approximately four and a half hours of deliberations, with Bankman-Fried facing the possibility of up to 110 years in prison. Sentencing is scheduled for March 28, 2024. Bankman-Fried was convicted on multiple charges, including conspiracy, wire fraud, and securities fraud, despite pleading not guilty in December.
