After the largest cryptocurrency exchange in the United States warned that trade volume will decline in the first quarter, Coinbase Global Inc. stock fell approximately 3% in after-hours trading.
Even while revenue increased to $2.5 billion in the fourth quarter, it fell short of analysts’ expectations of $2 billion. Monthly transactional customers increased to 11.4 million. It exceeds analyst expectations of 9.8 million and up from 7.4 million in the previous quarter.
It predicts that retail monthly transacting clients and total trading volume will lower down in the first quarter than in the fourth quarter, according to a Coinbase investor letter. The exchange has seen a drop in crypto asset volatility and pricing so far this quarter.
“The picture for 2022 doesn’t appear as strong as it did for 2021,” said John Todaro, a Needham & Co. analyst with a ‘buy’ rating on Coinbase.
On the results conference call, Coinbase’s own corporate crypto investment surged by approximately $350 million “in the previous few weeks,” according to Chief Financial Officer Alesia Haas, who did not identify the purchased coins.
Since the business went public in April, Coinbase’s stock has moved in lockstep with Bitcoin’s price. Due to a dip in cryptocurrency values, the stock has plummeted nearly 30% this year. In after-hours trade, Coinbase fell to roughly $172.02.
Coinbase to Enter Derivative Market
Coinbase anticipates a drop in average transaction revenue per user to “pre-2021 levels” for the entire year. It predicts a range of 5 to 15 million monthly average retail transacting users.
In an interview, Haas stated, “It’s too early to call.” “We continue to see no pricing pressure on our core retail goods,” the business said, reiterating its earlier statement that fee compression will occur “over time.”
Investors have been apprehensive about a potential crypto winter, which might dampen retail traders’ enthusiasm. Because of macroeconomic variables such as fears about inflation, interest rate hikes, and geopolitical instability, cryptocurrency has been caught in risk-off trade. But we highly season our ability to execute through volatility Haas added.
Trading, particularly individuals generate the majority of the company. Subscriptions and services such as custody have helped Coinbase diversify its revenue streams. It is preparing to launch an NFT marketplace and has formed a relationship with Mastercard Inc. to allow users to make transactions using Mastercard Inc. cards. The company has not yet announced the platform’s debut.
Altcoins, or tokens other than Bitcoin and Ethereum, accounted for 68 % of trading volume in the fourth quarter. This is according to the exchange, which is the biggest % ever reported.
Coinbase has been preparing to enter the derivatives market. It took the biggest step yet toward moving into crypto derivatives by acquiring authorized futures exchange FairX in January. The exchanges based outside the US, such as Binance and OKEx dominate the derivatives market. Through its acquisition of LedgerX LLC, FTX.US, a Coinbase competitor in the United States, also offers futures trading.
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