Coinbase shares drop on predicted fall in active users and trading volume

Shares in Coinbase Global Inc. dropped in late trading today after the company warned that it expects active users and trading volume to fall in the first quarter.

For the company’s fourth-quarter ended Dec. 31, Coinbase reported a profit before costs such as stock compensation of $3.32 a share on revenue of $2.29 billion, the latter up from $497 million in the same quarter of 2020.

Analysts had been predicting earnings per share of $1.85 on revenue of $1.94 billion.

The figures in the quarter were positive all round. Net income came in at $840 million, up from $177 million in the fourth quarter of 2020 and $406 million in the previous quarter. Retail trading volume in the quarter jumped 90% from the third quarter, to $177 billion, while institutional trading rose 59% from the previous quarter, to $371 billion. Institutional trading now accounts for 68% of Coinbase’s trading volume.

Assets held by Coinbase as of Dec. 31 were $278 billion, up from $255 billion in the third quarter and $90 billion at the same time last year. One interesting shift is the ongoing decline of bitcoin as the most held asset class on Coinbase.

In the fourth quarter of 2020, bitcoin accounted for 70% of all assets held on Coinbase, but that dropped to 40% as of the end of December 2021. Ethereum has grown from 13% to 25% of assets in the platform over the same period, while other cryptocurrency assets have grown from 13% to 31%.

For the full fiscal 2021, Coinbase reported a net income of $3.624 billion on net revenue of $7.355 billion. That compares with $322 million in profit on $1.141 billion in the previous year.

“In 2021, millions of new users joined the cryptoeconomy through Coinbase; we generated $7.4 billion in net revenue – including $2.5 billion in the fourth quarter; we became the first publicly traded crypto asset trading platform; and we made substantial progress in building a best-in-class infrastructure to enable easy, safe and secure on-ramps and access into the global cryptoeconomy,” the company said in a letter to shareholders.

Although the quarter’s results, particularly earnings per share, smashed expected numbers, it was the company’s outlook that had investors concerned.

Coinbase did not give any solid numbers on expected revenue for the quarter ahead nor the full year. The outlook starts with Coinbase stating that it has seen a decline in crypto asset volatility and crypto-asset prices from the fourth quarter. It added that it believes retail monthly transactions users and total trading volume will be lower in the quarter.

“We enter 2022 with even more unknowns which make our business all the more difficult to forecast,” the company told investors. “On one hand, in addition to the unpredictability of crypto asset prices and volatility, we also face global macroeconomic headwinds, rising interest rates, inflation and more recently, geopolitical instability.”

Coinbase shares were down more than 5% as of 7:22 p.m. EST.

Photo: Coinbase