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Coinbase slides after revenue falls short of expectations amid crypto winter

Coinbase Global (COIN) said Tuesday afternoon user growth slowed in the second quarter and is set to fall further over the balance of this year as top-line results came in well shy of expectations.

The largest cryptocurrency exchange in the U.S. reported monthly transacting users, or MTUs, of 9 million in Q2, more than the 8.4 million analysts had expected, but down from 9.2 million in the prior quarter. The company expects average annual MTUs will total 7-9 million in 2022.

Coinbase said trading volume in the second quarter fell by $92 billion, a reflection of the crypto market’s swoon during the quarter.

The company’s quarterly results missed Wall Street estimates, with net revenue coming in at $802.6 million against expectations for $854.8 million. In the same quarter last year, net revenues topped $2 billion.

"At Coinbase, we live by the mantra, 'It's never as good as it seems and it's never as bad as it seems,'" the company said in its second quarter letter to shareholders.

"Coinbase is an all-weather company with experience in navigating through crypto asset price cycles. We continue to take a long-term view and remain focused on building for the future."

Shares of the company were down about 5% in after hours trading. The stock has lost roughly two-thirds of its value so far this year.

The logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others at Times Square in New York, U.S., April 14, 2021. REUTERS/Shannon Stapleton
The logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron and others at Times Square in New York, U.S., April 14, 2021. REUTERS/Shannon Stapleton

Here are some of the key figures from the report, compared to estimates from Bloomberg:

  • Revenue: $802.6 million vs. $854.8 million

  • Monthly transacting users (MTUs): 9 million vs. 8.4 million

  • Trading volume: -29% to $219 billion vs. -28% to $220.4 billion

  • Subscription and services revenue: $147 million million vs. $138.7 million

  • Assets on the platform: $96 billion vs. $156.95 billion

  • Adjusted EBITDA: ($151 million) vs. ($187.2 million)

  • Earnings per share: ($4.98) vs. ($2.28)

From the beginning of April to its trough on June 18, the total market capitalization for all crypto assets dove by 63% from $2.15 trillion to $802 billion according to Coinmarketcap.

"Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue," Coinbase said in its report.

Monthly transacting users (MTUs) dropped to 9 million, which was down from 9.4 million in Q1 but roughly 600,000 more users than Wall Street anticipated.

Total trading volumes declined by 29% through the second quarter to $219 billion from $309 billion by the end of the second. Retail "buy-the-dip" activity, which drove part of the increase in the first quarter, deteriorated into the second quarter.

Retail trading volume was $46 billion, a decline of $28 billion compared to Q1, while institutional trading was $171 billion, a decrease of $64 billion.

The platform's most-traded asset remains bitcoin, which accounted for 31% of transaction revenue in the quarter. Ether totaled 22% of transaction revenue; all other assets accounted for the additional 47%.

Subscription and services revenue such as staking, which analysts have previously hoped could be a diversified revenue stream to crypto trading volume, continued to decelerate in Q2. Making up $147 million of quarterly revenue, subscription and services remained little-changed from the $152 million realized in Q1.

In addition to the 18% workforce reduction announced on June 14, Coinbase said it will lower its "full year expense range for Technology & Development and General & Administrative expenses" while also "taking a 'pause, maintain, and prioritize' approach to product development" outside of key areas.

As of Tuesday afternoon, bitcoin, which has taken a less bearish turn in recent weeks, was changing hands at $23,163, down 3% on the day. The market's largest cryptocurrency has slid from $47,163 to $23,163 since the beginning of January.

"While Q2 results were consistent with the outlook we provided in May and reflect challenging crypto market conditions, we are actively adjusting to market conditions," Coinbase added.

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