Coinbase blames falling crypto volumes as revenue falls

Coinbase suffered sharp declines in revenue and trading volume in the third quarter, as the washout in bitcoin and other digital assets has turned the fortunes of the once fast-growing cryptocurrency exchange.

The US-listed company acknowledged “another tough quarter” as it reported net income of $576 million, down from more than $1.2 billion a year earlier and from $803 million in the previous quarter. Coinbase lost $545 million in the quarter, compared to a net profit of $406 million a year earlier.

The plunge in crypto markets earlier this year continues to take its toll on trading venues like Coinbase. Tokens like bitcoin and ether have lost roughly 70 percent of their value since their all-time high last year. Trading volume and monthly transaction users at Coinbase fell by 27 percent and 6 percent, respectively, from the second to the third quarter.

The price crash was followed by range trading for popular crypto tokens. Recent figures shared by data provider CryptoCompare showed that average annual volatility for bitcoin reached its lowest point since October 2020. The lack of price action has put renewed pressure on Coinbase, which described volatility in cryptoassets as a “key driver of our retail volume” in a letter to shareholders.

“This was a very difficult quarter for Coinbase as macro and crypto headwinds take center stage. The user base is declining and it’s not a storybook quarter for the Street,” said Dan Ives, senior equity analyst at Wedbush Securities.

Coinbase announced in June that it would cut nearly a fifth of its workforce, which totaled more than 1,000 employees. CEO Brian Armstrong at the time admitted the exchange was growing “too quickly”, ending 2021 with over 3,700 employees. It also pulled job offers on the stock market as part of the sharp pullback.

Earlier this week, Coinbase chief product officer Surojit Chatterjee said he was stepping down, saying “now it’s time to step down and take a breather”. Chatterjee will continue to serve as an advisor to Armstrong.

Coinbase also cited “macroeconomic factors” and “geopolitical factors” — including the war in Ukraine — weighing heavily on the financial and crypto markets.

“Crypto tried to distance itself from the mainstream economy, making claims that bitcoin was a hedge against inflation and that crypto would continue to exist almost in its own bubble,” said Charley Cooper, CEO of blockchain group R3. “I think it’s important to put into context that the crypto world is increasingly influenced by the broader economy.”

Assets on the Coinbase platform rose by $5 billion from the second quarter to $101 billion. Despite a difficult financial year, a deal was agreed with asset management group BlackRock in August to give the latter’s clients more seamless access to digital asset markets. The move – considered a victory for Coinbase – was seen as a sign that institutional appetite for digital assets remained despite the decline in prices.