On Nov. 3, Coinbase Inc. had its third-quarter earnings call, reporting that revenue had missed analysts’ expectations.

Company revenue plunged more than 50% from the previous year earlier as trading activity dwindled. This resulted in a loss of $545 million compared to a profit of $406 million in Q3 2021. In a letter to shareholders, the company stated:

“Transaction revenue was significantly impacted by stronger macroeconomic and crypto market headwinds, as well as trading volume moving offshore,”

Coinbase makes as much as 90% of its profit from its above-industry average transaction fees, and in a bear market, that model is clearly suffering.

Coinbase Losing Users

The company reported that Q3 transaction revenue was $366 million, down 44% from the second quarter. However, subscription and services revenue increased by 43% to $211 million. Net revenue for the period was down 28% from Q2, 2021.

The firm’s earnings before interest, taxes, depreciation, and amortization (EBITDA) were a loss of $116 million for the period. This is down from the $618 million profit for the same period in 2021.

It noted that the macroeconomic conditions drove down the trading volume as retail investors switched to hodling. Coinbase also said that trading volume had shifted away from the U.S. due to regulatory concerns and uncertainty.

The company has also been losing users. Coinbase reported 8.5 million monthly transacting users (MTUs) during the third quarter, down from 9 million in Q2 and 9.2 million for Q1.

Trading volume had fallen 27% to $159 billion from $217 billion the previous quarter. Ethereum, which has recently been outperforming Bitcoin, made up 33% of the total volume for the period, and Bitcoin was 31%.

Coinbase predicted more doom and gloom for next year:

“For 2023, we’re preparing with a conservative bias and assuming that the current macroeconomic headwinds will persist and possibly intensify.”

Stock Down Deeper That Crypto

Coinbase stock has lost three-quarters of its value since the beginning of the year due to a deepening bear market and a shift away from risk-on assets.

COIN actually gained almost 5% in after-hours trading despite the lower-than-expected revenue figures. According to MarketWatch, the stock was trading for $58.55 at the time of writing.

COIN has tanked 83% from its all-time high of $343 last year, a deeper decline than the crypto markets themselves.

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Martin Young

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