Coinbase, the second-largest cryptocurrency exchange, released its fourth-quarter 2022 earnings report on Tuesday, giving shareholders and market participants an up-to-date view of its financial performance. In response to the report, the company's shares fell slightly after hours.
In Q4 2022, Coinbase generated $605 million in total revenue, a significant decrease from $2.49 billion in the prior quarter. Coinbase's revenue was insufficient to cover costs, as the company lost $557 million on GAAP (net income) in three months ($2.46 per share) and an adjusted EBITDA deficit of $124 million.
According to Yahoo Finance, Wall Street expects Coinbase to generate $581.2 million in revenue and $2.44 in earnings per share, and $201.8 million in adjusted EBITDA, thanks to 8.4 million business users per month (MTUS).
Prior to the fourth quarter earnings release, Coinbase shares were up 86% year-over-year. Even with this rally, Coinbase's share price is still well below its 52-week high of $206.79.
Coinbase is known for lowering trading volumes that exceed expected returns; Coinbase has historically generated most of its revenue from transaction fees, which made Q4 2022 a success. Consumer trading volume fell from $26 billion in the third quarter of last year to $20 billion in the fourth quarter, while institutional volume fell from $133 billion to $125 billion during the same period.
Total crypto market capitalization has fallen to 64%, or $1.5 trillion by 2022, causing Coinbase's total trading volume and trading revenue to fall 50% and 66% year-over-year, the company said. company.
As expected, trading revenue at Coinbase fell in the fourth quarter compared to the third quarter of last year from $365.9 million to $322.1 million due to a decrease in trading volume. (TechCrunch compared Coinbase's Q4 2022 results to Q3 2022 results, not Q4 2021 because the latter comparison is less relevant given how much the cryptocurrency market has changed over the past year; activity general cryptographic in the last months of 2021)
There is good news in the Coinbase report. While Coinbase's trading revenue has been less impressive, the company's other revenue has skyrocketed. What Coinbase calls “subscription and service revenue” increased from $210.5 million in Q3 2022 to $282.8 million in the same quarter in Q4.
And while the crypto industry has experienced some catastrophic events, including the Terra/LUNA and FTX failures, other areas are still growing. Since 2020, the number of monthly active cryptocurrency developers has multiplied to more than 20,000, including major brands like Starbucks, Nike, and Adidas, as well as social media platforms like Instagram and Reddit.
As major players enter cryptocurrencies, industry players expect the move to lead to increased product use case adoption and trade volumes. While the traditional retail and Web 2.0 trading markets showed strong activity, transaction volumes for Coinbase users, both personal and institutional, fell during the quarter.
Moving forward, it will be interesting to see if this stock picks up and trading interest resumes in 2023, or if users of platforms like Coinbase will continue to shy away from profit and be forced to look for something else (like a subscription service). . ). Market.