Coinbase shares rise after non-trading revenue rises amid continued crypto winter

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Coinbase, the second largest crypto exchange by trading volume, published its Q4 2022 earnings on Tuesday, giving both shareholders and market participants an updated look at its finances. In response to the report, the company’s shares fell modestly in early aftermarket trading.

In the fourth quarter of 2022, Coinbase generated $605 million in total revenue, down sharply from $2.49 billion in the year-ago quarter. Coinbase’s top line wasn’t enough to cover expenses: the company lost $557 million in the three-month period on a GAAP basis (net income) worth -$2.46 per share, and an adjusted EBITDA loss of $124 million.

Wall Street expected Coinbase to report $581.2 million in revenue and earnings per share of -$2.44 with adjusted EBITDA of -$201.8 million driven by 8.4 million monthly transaction users (MTUs), according to data provided by Yahoo Finance.

Before Q4 earnings were released, Coinbase stock had risen 86% year-to-date. Even with that rally, the value of Coinbase on a per-share basis is still significantly down from its 52-week high of $206.79.

That Coinbase beat revenue expectations is notable in that it came with a decline in trading volume; Coinbase historically generated most of its revenue from trading fees, making Q4 2022 remarkable. Consumer trading volumes fell from $26 billion in the third quarter of last year to $20 billion in the fourth quarter, while institutional volumes over the same time frame fell from $133 billion to $125 billion.

The total crypto market value fell by around 64%, or $1.5 trillion during 2022, resulting in Coinbase’s total trading volume and transaction revenue falling by 50% and 66% year-over-year, respectively, the company reported.

As you would expect with a decrease in trading volume, trading revenue on Coinbase fell in Q4 compared to the third quarter of last year, falling from $365.9 million to $322.1 million. (TechCrunch compares Coinbase’s Q4 2022 results to Q3 2022 instead of Q4 2021, as the latter comparison would be less useful given how much the crypto market has changed over the past year; we’re all aware that overall crypto activity has fallen from the last few months of 2021.)

There was good news in the Coinbase report. While Coinbase’s trading revenue was less than exuberant, the company’s other revenues posted gains. What Coinbase calls its “subscription and services revenue” rose from $210.5 million in the third quarter of 2022 to $282.8 million in the fourth quarter of the same year, a gain of just over 34% in a single quarter.

And while the crypto industry faced a series of catastrophic events, including the Terra/LUNA and FTX collapses to name a few, there was still growth in other areas. The monthly active developers in crypto have more than doubled since 2020 to over 20,000, while major brands such as Starbucks, Nike and Adidas have dived into the space along with social media platforms such as Instagram and Reddit.

With major players entering crypto, industry players are hoping this move results in greater adoption both for product usage and trading volume. Although there was a lot of movement from traditional retail markets and Web 2.0 businesses, trading volume for both consumers and institutional users fell quarter over quarter for Coinbase.

Looking ahead, it will be interesting to see if these chips rebound and trading interest re-emerges in 2023, or if platforms like Coinbase will have to continue looking elsewhere for revenue (like the subscription service) if users continue to shy away from the market .