Due to sluggish trading in the cryptocurrency market, Coinbase released third-quarter results on Wednesday that were lower than anticipated.
The company stated that an October decline in the price of ether could counteract the current quarter’s growth in subscriptions and services, even though trading is anticipated to be more active in the fourth quarter.
The stock last saw a 4% decline during prolonged trading. It had previously dropped as much as 7%.
Here is a comparison between the company’s third-quarter results and Wall Street’s expectations based on an LSEG survey of analysts:
Earnings per share: 28 cents as opposed to the anticipated 41 cents
Revenue: $1.21 billion as opposed to the anticipated $1.26 billion
The biggest cryptocurrency marketplace in the United States, Coinbase, reported net income of $75.5 million, or 28 cents per share, up from a loss of $2.3 million, or 1 cent per share, a year earlier.
Due to lower cryptocurrency prices on September 30 compared to June 30, Coinbase’s cryptocurrency investment portfolio experienced pretax losses of $121 million in the most recent quarter, the great majority of which went unrealized.
Within its core business, retail trading revenue increased 98% to $483.3 million over the prior year, while institutional revenue increased 292% to $55.3 million over the same period last year. $572.5 million was the total transaction revenue, a 98% increase from the previous year.
A year ago, Coinbase’s subscription and services revenue was $556.1 million, a 66% increase. These services include stablecoins, staking, and leverage for Prime traders, among other things.
In October, the price of ether fell by 10% from its average for the third quarter, and among other challenges, the company predicted flat growth in the category due to interest rate cuts that reflected market expectations.
For a large portion of this year, the cryptocurrency market has been in a bit of a slump, remaining confined to a small range between $55,000 and $70,000. As investors watched the U.S. presidential election and mostly stayed out of the market, Bitcoin has experienced low volatility and no notable catalysts. Coinbase has been actively supporting pro-crypto political action committees with millions of dollars this year.
One positive development in the third quarter was stablecoins, which are generally regarded as the killer app for cryptocurrency. Despite the lackluster cryptocurrency price action, stablecoin market capitalization hit all-time highs, contributing to Coinbase’s stablecoin revenue of $246.9 million for the third quarter. While it is up 43% from the same period last year, it is up 2.6% from quarter to quarter.
For the interest income from the reserves supporting USD Coin (USDC), the second-largest dollar-backed stablecoin available on the market, Coinbase and Circle have a 50/50 revenue-sharing arrangement. Given that interest rates are predicted to continue declining, that revenue may be contested in the current quarter.
In its earnings report, the company also disclosed a $1 billion stock buyback.
