Coinbase says crypto markets have “improved” but the rest of the year is uncertain

by Arthur · February 21, 2023

By Bill Peters

“The short-term path looks increasingly treacherous,” the analyst says

Coinbase Global Inc. on Tuesday reported fourth-quarter results that beat estimates, saying the crypto market had “improved” so far in the first quarter, but that the rest of the year remains cloudy.

The crypto trading platform reported a fourth-quarter net loss of $557 million, or $2.46 per share, compared with a profit of $840 million, or $3.32 per share, in the same quarter in 2021. Revenue came in at $629 million dollars, compared to 2.49 billion dollars in the previous quarter. Trading volume fell to $145 billion during the fourth quarter.

Analysts polled by FactSet expected Coinbase (COIN) to lose $2.52 a share, on revenue of $588 million. They expected a trading volume of $145.7 billion.

Coinbase ended the quarter with average monthly transaction users — or retail users who trade at least once every four weeks — of 8.3 million. That was slightly above FactSet forecasts of around 8.2 million, but down from the same quarter a year earlier.

The company ended 2022 with cash and cash equivalents of about $4.43 billion, down from $7.12 billion in 2021.

Executives said the total market cap for crypto was up 40% year-to-date through Feb. 17, and that Coinbase brought in $120 million in transaction revenue in January. But they cautioned against calling these numbers any kind of trend.

“Given the unpredictability of crypto markets, we have limited certainty around the rest of the year,” they said.

Management said it was focused on improving profits and said “we do not expect to increase headcount in a meaningful way compared to Q1 levels, which we expect to be close to 3,650 people.”

Shares fell 1.2% after hours, in choppy trading activity.

The results follow a flight from crypto trading that began in 2021, when fears of inflation and recession made traders more cautious about volatile assets, and was interrupted last year by the collapse of crypto exchange FTX. Shares in Coinbase have risen so far this year, however, in line with a decline in the price of bitcoin. The company also said last month that it would cut around 20% of its workforce.

Still, DA Davidson analysts noted in a research note last week that US regulators have begun cracking down more aggressively on crypto, following growing concerns about security and fraud. The Securities and Exchange Commission has proposed measures that would tighten custody requirements, and the agency has targeted other companies over stablecoins — or cryptocurrencies whose value is tied to another asset, such as traditional money — and betting, a way to earn passive income. on crypto holdings.

Coinbase last month agreed to a $100 million settlement after the New York State Department of Financial Services found “significant flaws” in the exchange’s compliance protocols, leaving it vulnerable to “serious criminal conduct” such as fraud and money laundering, it said the agency.

“While we still agree with (management’s) view that improved clarity and a level playing field should ultimately prove good for both Coinbase and the sector overall, the near-term looks increasingly treacherous,” the analysts said.

While Coinbase shares are up so far this year, shares have fallen 64.3% over the past 12 months. By comparison, the S&P 500 index has fallen 7.1% over the past 12 months.

-Bill Peters

(END) Dow Jones Newswires

02-21-23 1833ET