Coinbase Global Inc., owners of a leading U.S. cryptocurrency exchange, reported $1.17 billion in revenue during the first quarter, which was much lower than analyst experts had anticipated. In after-hours trading, the shares dived by 12%.
What Caused Coinbase’s Stock Price To Drop?
In recent months, Coinbase’s monthly transacting users dropped to 9.2 million, which was lower than the estimate of 9.5 million. As well as that, the cryptocurrency market is plummeting, experiencing a downward trajectory that we haven’t seen for some time. On top of that, the wider global market is struggling.
Coinbase CEO Brian Armstrong spoke on these points during an earnings call on Tuesday, stating “It’s worth just addressing the elephant in the room, which is that of course, the broader markets are down,” and that “We tend to do our best work in downturns, so, ironically…I’ve never been more bullish on where we are as a company.”
Despite Armstrong’s optimism, the total trading volume for the first quarter was $309 billion, accounting for a 44% decrease from the fourth quarter of 2021. The company has stated that the huge drop is due to market conditions and expects the trend to continue into the second quarter, though the outlook for the year is “largely unchanged,” according to the shareholder letter on Tuesday.
Coinbase Eyes Diversification
Trading fees accounted for $1 billion of Coinbase’s first-quarter revenue. Though, the Coinbase top brass wants to diversify from trading fee revenue, offering futures and derivatives products, prime brokerage offerings, as well as a subscription model that has zero-fee transactions.
In the first quarter, the company registered $152 million in revenue from subscriptions and services. Coinbase’s CFO Alesia Haas said the company’s vision, is “to make our focus on building great product experiences, building up our user base and getting ready for the return of the market.”
Given the torrid market, we are faced with at the moment, it’s going to be a slow process for Coinbase. As many investors take a back seat and wait for some stability in the markets, it makes takes time before we see any of the new products hit the platform.
The instability of the market has affected many coins, with Bitcoin dipping below $27,000 as of Wednesday and Ethereum closing in on $2,000. Coinbase CEO Armstrong said about the current state of the market and the future “This doesn’t faze us, because we’ve always taken a long-term perspective on crypto adoption.”