Coinbase Posted Poor Results amidst Recent Crypto Sell-Off

  • COIN.us
    (${instrument.percentChange}%)

Poor Q1 Results & Q2 Outlook

The online cryptocurrency exchange platform, released its financial results for the first quarter of the year on Tuesday after the US stock market closed. Total Net Revenue slumped to 1.165 billion, around half of the 2.490 billion it had reported in the fourth quarter of 2021. It also reported a Net Loss of $430 million, form a Profit of $840 million in the previous quarter. [1]

More bad news came from the transaction metrics, since Coinbase saw the number of its Monthly Transacting Users (MTUs) declining by 19% quarter-over-quarter, to 9.2 million, while Trading Volume dropped to $309 billion, compared to $547 billion in the previous quarter.

Most of that was generated from the Institutional business, while Bitcoin and Ethereum were the most traded products, accounting for a combined 45% of the total trading volume.

Things don't seem much brighter for the current quarter, as the firm provided downbeat forward guidance. It projects both Monthly Transacting Users (MTUs) and Total Trading Volume to be lower in Q2 compared to the just announced Q1 figures.

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Lower Crypto Prices

The results came amidst a sell-off in cryptocurrencies, with FXCM's CryptoMajor Basket sheding around 20% on the month, while BTC/USD has erased more than 50% from its November record high (69,023), at the time of writing.

Coinbase said in yesterday's shareholder letter, that lower cryptocurrency prices and volatility, were factors that "directly impacted" its results. However, it remains "as excited as ever about the future of crypto", having entered the market with "foresight and preparation".

Tightening Regulatory Environment

Back in March, US President Biden had signed an Executive Order on ensuring responsible innovation in digital assets, including cryptocurrencies, aiming to address the risks and harness the potential benefits of digital assets and their underlying technology. [2]

US Treasury Secretary Ms Yellen said that "digital assets may pose risks to the financial system, and increased and coordinated regulatory attention is necessary", and that "There are many risks associated with cryptocurrencies" during yesterday's testimony on the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate. [3]

President & CFO Emilie Choi stressed that the firms invests heavily in compliance, as this helps it "solidify" relationship with customers and regulators, during the earnings call. [4]

Stock Movement

Coinbase celebrates 10 years this year and had gone public in Arpil 2021, but the stock has not performed very well. COIN.us erased around 25% during the first quarter of the year, extending its loses during the current one. Today it sheds around 20%, as markets react negatively to the disappointing results.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 11 May 2022 https://s27.q4cdn.com/397450999/files/doc_financials/2022/q1/Coinbase-Q122-Shareholder-Letter.pdf

2

Retrieved 11 May 2022 https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/

3

Retrieved 11 May 2022 https://www.banking.senate.gov/hearings/05/03/2022/the-financial-stability-oversight-council-annual-report-to-congress

4

Retrieved 01 Jul 2022 https://s27.q4cdn.com/397450999/files/doc_financials/2022/q1/Coinbase-Q1'22-Earnings-Call-Transcript.pdf

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