Cryptocurrency Exchange Coinbase Global Inc. beat projections after delivering its fourth-quarter earnings and revenues on Tuesday. However, the number of users on Coinbase fell short of estimates due to reduced trading activities, bringing the stocks down in after-hours trading.
The company reported a loss of $2.46 per share which is slightly better than the loss of $2.55 as predicted by several analysts. This is a positive indication for all the prospective investors.
Revenue collection dropped 75 percent as compared to last year’s revenue. The net revenue collection was $629 million against the $590 million estimates. Moreover, the company also reported a net loss of $557 million for the quarter, taking a sharp U-turn just one year after generating a net income of $840 million during peak crypto adoption. However, the concerning part of the report is its shrinking user base.
The San-Francisco based crypto exchange revealed that it has nearly 8.3 million monthly transacting users (MTUs) during the Q4, as compared to 8.5 million in the previous quarter. This is quite close to the analysts’ prediction of 8.22 million MTUs, according to the StreetAccount.
Meanwhile, the reports also highlighted the trading volume of the company which fell 9% to $145 billion from the prior quarter, while transaction revenues dropped 12% to $322 million for the current quarter. This was below the estimate of $327 million consensus among analysts, according to StreetAccount. Currently, the company is anticipating subscription and services revenue of $300 million to $325 million. It also expects restructuring expenses of around $150 million.
Looking at its ongoing quarterly reports, the company is striving to diversify its revenue streams and not merely depend on trading fees.
Despite the current economic conditions, Coinbase Global Inc. still remains as one of the major US-based crypto exchange systems as it complies with most of the US regulations surrounding digital assets. However, its prospective businesses are under surveillance from the SEC to secure registrations. There are growing fears among investors that the authority’s strict measures will compel Coinbase to delist many of its cryptocurrencies.
Consequently, Chief Executive Brian Armstrong and Chief Legal Officer Paul Grewal have vowed to take legal action against any such measure.
Recently, competitor exchanges platform Kraken and Uphold was forced to end its staking services due to charges of selling unregistered securities.
Various crypto exchanges offer staking services which allow customers to lock their crypto assets with a blockchain validator. It helps to ensure the accuracy of transactions and investors also gain additional tokens as reward for effectively locking those cryptos.
Despite the enforcement measures of the SEC which has great potential to impact trading volumes of Coinbase, it is not apparent if the company will meet the same fate as Kraken. Meanwhile, in an interview with CNBC, Haas claimed that the staking product “is not a security.” She further added that since staking products contribute less than 3 percent to the company’s total revenue, yet it is a crucial component of the company which it plans to grow.
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