One of the world’s leading crypto exchanges Coinbase has seen its revenue tumble 75%, while posting a loss of $557 million in its fourth quarter (Q4) report, amid a series of scandals and bankruptcies.
According to reports, Coinbase revenue plunged by more than three quarters, the lowest in two years. While the $629 million in revenue for the three-months which ended in December was higher than the average analyst estimate of $581 million, it was about a quarter of the $2.5 billion registered in the year-earlier period.
The loss was the fourth consecutive one for the crypto exchange, which has suffered from the devastating fluctuations of the prices of cryptos. Also, trading volume on Coinbase exchange platform reportedly fell each quarter of 2022 as investors avoided the crypto market amid a market slump. The company expects first-quarter subscription and services revenue between $300 million and $325 million.
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Coinbase disclosed that it was operating toward the goal of improving adjusted Ebitda, a measure of profitability before some costs. The company’s Chief executive officer Brian Armstrong, said on an earnings call that the company has evolved to aim for generating “adjusted Ebitda in all market conditions,” rather than operating with a goal of roughly breaking even across cycles.
It’s no surprise that Coinbase had a challenging quarter given the collapse of cryptocurrency exchange FTX and crypto lender Blocki. Both companies filed for bankruptcy last November, affecting confidence in digital assets as cryptocurrencies like Bitcoin dipped as low as $15,480.
Meanwhile in 2023, trading volume has increased on Coinbase’s platform, while rivals like Kraken and Gemini have faltered, though this will not be reflected in the upcoming financial report.
The crypto exchange Chief Financial Officer Alesia disclosed that markets have rebounded in the current quarter compared to Q4 2022, which he said that market conditions have really evolved, even in a single month.. He further added that Coinbase generated $120 million in transaction fee revenue in January, adding that retail has come back to the market.
Coinbase’s shares have rallied by about 75% so far this year as a crypto price rally ramped up trading volumes. The stock, which fluctuated after the release of fourth-quarter results, tumbled 85% last year.
The crypto exchange has so far carried out two layoffs, trimming its headcount by roughly 1,100 employees last June and letting go of 950 employees in January last month. Executives disclose that the reduced overhead could help coax Coinbase along its path to restoring profitability.
Coinbase went public in 2021 and is the only exchange based in the U.S. that’s subject to requirements that come with trading on a public stock exchange. Aside from fees related to transactions on its platform, Coinbase sees revenue from providing custody of digital assets, staking, and other subscriptions and services.