Coinbase Up 4% Despite Missing Revenue Estimates by $60M

Coinbase posted its Q3 earnings report this Thursday. The shareholder letter paints a somewhat mixed picture with the net revenue down by 28% from Q2, but some other categories outperforming expectations. The announcement caused Coinbase’s shares to whipsaw in after-hours trading.

Coinbase Posts Q3 Earnings

After a warning issued in its Q2 letter, the waning performance of Coinbase didn’t come as too big of a surprise. The company missed its net earnings estimates of just over $640 million and made around $590 million. The company also saw a 44% decline in transaction revenue. 

Coinbase’s monthly transacting users (MTUs) were also down 5% from the previous quarter, but not without a silver lining. MTUs were actually above the estimate of 7.7 million users and stood at 8.5 million. Trading volumes were also down—both from Q2 and compared to the estimates—standing at around $150 million in the quarter closing in September, and institutional investors account for almost ⅚ of the volume.

The company has also been facing both external pressure and internal restructuring. In September, Veritaseum Capital sued Coinbase for $350 million over a patent. Internally, the company has been seeing some major departures. This Wednesday, the company’s chief product officer Surojit Chatterjee announced he was leaving the company amidst the wider restructuring.

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Why Did Coinbase Shares Whipsaw?

Throughout most of Thursday, Coinbase shares were on a steady decline falling 8% to $55.80 from a previous close of $60.71. The initial reaction to the shareholder letter deepened the losses bringing the price down another 5%. Their value, however, quickly saw an upward trend of around 4% getting above Thursday’s close and reaching around $58.

A part of this whipsaw can be attributed to some of the better-than-expected results the company achieved in Q3—the number of MTUs being one of them. But Coinbase also pointed out its other activities in the quarter and expressed confidence in the future.

Coinbase has been banking on the institutional adoption of cryptocurrencies and made deals with Google, and, perhaps more famously, with BlackRock. The company has also been actively working to gain regulatory approval around the world and it became the first major crypto exchange to gain it from Dutch authorities. The firm has also been nurturing its relationship with DeFi platforms with MakerDAO recently approving the transfer of $1.6 billion worth of USDC to its custody program.

Do you think institutional adoption will help offset the current crypto winter in a meaningful way? Let us know in the comments below.