Coinbase misses third-quarter revenue estimates as trading volumes plunge during the low volatile summer. The company’s CFO Alesia Haas shares the future outlook for the crypto exchange.
On Tuesday, November 9, crypto exchange Coinbase Global Inc (NASDAQ: COIN) reported its third-quarter (Q3) 2021 earnings by widely missing its revenue estimates. The company’s revenue stood at $1.31 billion against the estimated $1.57 billion.
On the other hand, Coinbases also reported a drop in the monthly transacting users to 7.4 million from 8.8 million in the second quarter. However, it still remains up from the 6.1 million users a year back. Trading volumes also dropped by 25% to $327 billion from the $462 billion in the previous quarter. In its official shareholder letter, Coinbase noted:
“As our year-to-date results have clearly demonstrated, our business is volatile. Coinbase is not a quarter-to-quarter investment, but rather a long-term investment in the growth of the cryptoeconomy and our ability to serve users through our products and services. We encourage our investors to take this point of view.”
The Coinbase stock (NASDAQ: COIN) tanked more than 8% on Wednesday. By the end of the trading session, the COIN stock was trading at $328.60. The COIN stock made its debut on Wall Street earlier this year in April. After yesterday’s correction, the COIN stock was trading flat with its price on the debut day.
The thing is that most of Coinbase’s business depends on the performance of crypto assets like Bitcoin. Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) have been currently trading close to their all-time highs.
In its Q3 report, Coinbase also noted that Bitcoin accounts for 19% of its trading volume. On the other hand, Ethereum (ETH) accounted for 22% of the trading volume on the platform. The other 59% came from other rapidly emerging altcoins in the crypto space.
Coinbase’s CFO Shares Future Outlook
During the earnings call, Coinbase CFO Alesia Haas shared the future outlook for the company. Although the crypto trading volumes dropped significantly, Haas doesn’t see Coinbase as a trading business in particular. The Coinbase CFO thinks the trading business to be inherently a commoditized business.
“We don’t think of ourselves as primarily competing on fees today. Fees are not the primary aspect that we compete on,” said Haas. As the competition increases fees will certainly reduce in the future said the Coinbase CFO.
She further added that on the trail side of the business, Coinbase is currently competing on “access to assets”. Rather, the company is currently focusing on other range of products. This includes transacting with products like its Visa debit Coinbase Card, ability to interact in the decentralized finance (DeFi) space, use of future staking and much more.
The summer of 2021 was typically a period of low volatility. Thus, the drop in trading volume and trading revenue seems expected. Also, a period of low volatility has more activity among institutions rather than the retail counterpart. The Coinbase CFO further noted:
“We do think in the long term, though, zooming out a little, that we will see fee compression as more and more products will become commoditized in crypto. And so, we’ve already begun focusing on diversifying our revenue.”
Haas also noted that Coinbase is betting on the future when crypto enters the “utility phase”. “They’re also engaging with products like staking, earn, borrow, lend. And this is just the beginning,” she added.