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Coinbase posts big revenue beat but expects trading volume to fall in the first quarter

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Monitors display Coinbase signage during the company’s initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.
Michael Nagle | Bloomberg | Getty Images

Coinbase reported fourth-quarter earnings that beat analyst estimates after the bell on Thursday. Shares bounced around after the report. They were down about 5% after hours by the end of executives’ call with analysts.

Here are the key numbers:

Earnings per share (EPS): $3.32, versus $1.85 expected, according to a Refinitiv survey of analystsRevenue: $2.5 billion, versus $1.94 billion expected, according to Refinitiv

The company predicted that retail Monthly Transaction Users (MTUs) and total trading volume would be lower in Q1 2022 compared to Q4 2021. Coinbase attributed the change to decreased crypto asset volatility and a 20% decrease in crypto market capitalization quarter-to-date. It said the declining market cap is driven by macroeconomic factors like geopolitical instability and the U.S. Federal Reserve signaling a tightening of financial conditions.

Coinbase expects subscriptions and services revenue to be lower in Q1 because of crypto asset price declines.

MTUs grew to 11.4 million in Q4, up from 7.4 million in Q3. That came after Coinbase saw a decline in MTUs between Q2 and Q3.

It also saw net income double quarter-over-quarter to $840 million in Q4. That’s several times the net income Coinbase saw in Q4 2020, when it reported $177 million.

The report comes after major cryptocurrencies saw a weak month in December despite an overall explosion in value in 2021. Investors blamed the slow end of the year on concerns about cryptocurrency’s energy consumption and on macroeconomic factors like the rise of the omicron Covid variant.

On the company’s Q4 analyst call, CEO Brian Armstrong shot down the idea that the sector could be entering a new “crypto winter,” which is essentially a bear market. Armstrong said that’s because cryptocurrency now has significant use cases, unlike in earlier cycles of crypto winters and summers.

“I don’t expect it to be anything quite that pronounced over time,” Armstrong said, referring to previous crypto winters.

Coinbase warned shareholders in the previous quarter that its stock should be considered a long-term investment since its business is “volatile.”

That’s been demonstrated in recent weeks as major cryptocurrencies like bitcoin fell amid concerns that Russian troops would invade Ukraine. That’s led some analysts to question the idea that bitcoin could act as a safe-haven currency in times of geopolitical instability.

Coinbase warned in its letter to shareholders that 2022 will continue to have a fair amount of uncertainty for its business.

“We enter 2022 with even more unknowns which make our business all the more difficult to forecast,” the company wrote, pointing to “global macroeconomic headwinds” on top of unpredictable crypto asset prices, rising interest rates and inflation. But, it said, it sees increased opportunities and adoption of cryptocurrency.

CFO Alesia Haas said that while Coinbase’s stock moves have been largely tied to changes in cryptocurrency prices, the company hopes investors ultimately take into account the ways it is diversifying its platform and decouple the two. She noted that Coinbase is launching a non-fungible token (NFT) platform and that NFT prices and volume are “less correlated with other crypto assets.”

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