March 28 2024

Coinbase Revenue Drops by 50% as Bear Market Hits


By: Hannah Parker 

Allocation of assets, expense-to-income ratios, profit per share: the world of investing is fraught with options, complexities, and foreign jargon. However, there are two investment terms that you may be more familiar with: bull and bear markets. While both are used to describe market performance, they are very different regarding the impact they can have on your portfolio and investment decisions.

Bear markets, when stock prices fall 20% or more for an extended period, are the polar opposite of bull markets. Bull markets are typically driven by economic strength, whereas bear markets occur during economic slowdowns and higher unemployment. Investors want to sell instead of buy into the market, often fleeing for the safety of cash or fixed-income securities. As a result, it is a seller’s market.

Bear markets can last anywhere between a few weeks and several years. The Great Depression was the first and most well-known bear market.

So, how is the bear market affecting Coinbase?

Who is Coinbase?

In a relatively short period, cryptocurrency has grown from a small, alternative investment to one worth hundred of billions of dollars. You’ve probably heard of Coinbase if you want to invest in cryptocurrency or use it for payment. After all, it is one of the most popular cryptocurrency exchanges online, with tens of millions of users. It’s also one of the simplest ways to buy cryptocurrency, contributing to its meteoric rise.

Coinbase is a cryptocurrency exchange where you can purchase popular coins such as Bitcoin, Ethereum, and Solana. Coinbase does not support every coin, but it does support over 120 different types of cryptocurrencies. Meanwhile, thousands of different cryptocurrencies are available all over the world. Nonetheless, Coinbase allows you to trade the most popular types of cryptocurrency, so it serves the most purposes. But, as the bear market hit, it caused a significant impact on the popular cryptocurrency exchanges.

What Happened to Coinbase?

Coinbase reported net revenue of $576 million for the third quarter of 2018, a 28% decrease from the previous quarter’s $803 million.

According to the company’s earnings report, transaction revenue fell by 44% compared to the second quarter as fewer users were active on the crypto exchange. It’s a common refrain from exchanges as global market capitalization remains stagnant at $1 trillion, down $2 trillion from 2021.

According to the company’s shareholder letter, Coinbase’s monthly transacting users fell by 5%, and trading volumes fell by 27% during the third quarter, which ended on September 30. 2022. The exchange did report a 4% increase in the total value of assets on its platform, from $96 billion to $101 billion.

The platform’s actual trading volume dropped from $217 billion to $159 billion, making it the largest and only publicly traded crypto exchange in the United States. However, the company reported that its subscription and service revenue increased during the third quarter, from $147 million to $211 million.

In its shareholder letter, the company also mentioned recent deals with BlackRock and Google, implying that it is optimistic about institutional adoption. Coinbase claims that 25% of the top 100 hedge funds are customers.

Surojit Chatterjee, Coinbase’s Chief Product Officer, announced his departure at the beginning of November. Coinbase famously poached Chatterjee from Google (and gave him a compensation package that included $466 million in stock options) at the beginning of 2020. Still, he recently stated on LinkedIn that it’s “time to get off the ride and catch my breath.”

It was held by Bitcode Method Official that this was yet another setback in what had already been a difficult week for the company. 

However, there have been slight signs of hope.

Cathie Wood’s Ark Invest purchased COIN for the first time in a few weeks after selling nearly $75 million in shares in July 2022. Wood stated at the time that the decision was made after the SEC determined that nine tokens trading on Coinbase’s exchange were unregistered securities.

Aside from its earnings, Coinbase has advocated for its peers in the cryptocurrency industry.

Coinbase has supported the lawsuit against the US Treasury Department over the sanctioning of wallet data organized with Ethereum mixing service Tornado Cash since its most recent earnings call. It has submitted amicus briefs in support of Ripple and Grayscale in their court battles with the Securities and Exchange Commission.

Due to a deepening bear market and a shift away from risky assets, Coinbase stock has lost three-quarters of its value since the beginning of 2022. Despite the lower-than-expected revenue figures, COIN gained nearly 5% in after-hours trading. At the time of writing, the stock was trading for $58.55, according to MarketWatch. COIN dropped 83% from its all-time high of $343 last year, a drop greater than that of the crypto markets. With US stocks down roughly 19% and bonds down 15% so far in 2022, searching for an ostensibly elusive bottom can be exhausting. However, we continue to advise investors to be patient and avoid chasing index-level bear market rallies because with every bear market comes a bull market, and it’s just a matter of time. 


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