Coinbase's Q3 Earnings Disappoint, Sending Investors Fleeing

Shares of leading U.S. cryptocurrency exchange Coinbase plummeted by a double-digit percentage in extended hours trading in the wake of the company’s third-quarter earnings report. Coinbase missed on both the top and bottom lines, sending investors fleeing from the stock in fear.

Coinbase’s weaker revenue results reflect a lower bitcoin price in the summer months, when the leading cryptocurrency fell below the $30,000 level. Coinbase’s Q3 spot market trading volume fell 37% vs. Q2 results, which the company attributes to market volatility.

The long-term investment picture appears intact based on the bullish market and pace of bitcoin adoption, but investors should be willing to stomach some volatility in the interim. In the last three months, Coinbase’s stock was on track for a 30% increase before the earnings shortfall-fueled sell-off.

Coinbase Doldrums

The company’s Q3 EPS came in at $1.62 vs. Wall Street estimates of $1.79. Revenue sank to $1.31 billion, down from $2.2 billion in Q2 and falling short of expectations of $1.57 billion.

Now that the bitcoin price is hovering at a fresh all-time high, Coinbase could potentially experience some recovery in the fourth quarter. In fact, Coinbase in its shareholder letter referenced better market conditions in early Q4.

Coinbase’s other key metrics include $255 billion in total assets on the exchange compared to $180 billion at the end of Q2 2021. Coinbase boasts 73 million verified users.

Coinbase Innovation

Coinbase attempted more innovation in recent months but was rebuffed by regulators. For example, the exchange was preparing to enter the DeFi market fray with a new lending product, but the U.S. SEC threatened to sue the company if it followed through with its plans. So Coinbase nixed that idea.

Now Coinbase is looking to capitalize on another hot market segment, non-fungible tokens, or NFTs. The exchange is building an NFT platform, demand for which is robust. So far, Coinbase has 2.5 million users signed up on a waitlist to participate in Coinbase’s NFT marketplace.

The NFT platform will only support Ethereum-based standards to start. Ethereum is the most popular network for DeFi and NFTs, but transaction fees have been lofty. Coinbase plans to expand to a multi-chain model in the near future. The company expects to launch its NFT platform this year, which could buoy results as soon as Q4.

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