What Coinbase’s Q4 earnings mean for crypto adoption
Coinbase (COIN) reported fourth-quarter earnings that beat analysts’ expectations and compressed margins, but “it’s not necessarily something that’s unexpected” given the current economic environment, said Anthony Georgiades, co-founder of decentralized tier 1 blockchain Pastel Network , Wednesday .
Nonetheless, “digital assets are certainly here to stay,” he said on CoinDesk TV’s “First Mover.”
On Tuesday, San Francisco-based Coinbase, the world’s second-largest cryptocurrency exchange by trading volume, reported net revenue of $605 million in the fourth quarter, ahead of analyst estimates of $588 million, and up 5% from $590 million in the third quarter. Adjusted loss of $2.46 per share for the quarter also beat estimates for a loss of $2.52 per share, but transaction volume fell 12% quarter-over-quarter to $322 million due to lower overall trading volume.
During the earnings call, CEO Brian Armstrong warned retail investors to “not extrapolate these results forward,” pointing out that last year revealed how quickly the crypto market can change.
Investors are right to be wary, Georgiades said. Retail adoption today is “absolutely up in the air” because crypto markets are not immune to the broader macro environment.
Coinbase has been able to partially capitalize on the bankruptcy of other crypto exchanges, he said. Because it is a US publicly traded company, consumer and retail investors trust it. However, being a public company can also be one of its “biggest inherent barriers” when it comes to regulation.
In recent weeks, the US Securities and Exchange Commission (SEC) has cracked down on crypto companies. Earlier this month, the agency settled a $30 million fine with crypto exchange Kraken and ordered it to shut down its US betting service. The agency said separately that it plans to sue Paxos for allegedly selling an unregistered security token, Binance USD (BUSD).
Attempts to diversify Coinbase’s revenue may face headwinds. Georgiades said investors should be aware of the three hyper-growth areas Coinbase offers – coin escrow, stablecoins and staking products. These areas “all come under significant regulatory scrutiny.”
Depending on what regulators do and whether “Coinbase wants to continue to drive hyper-growth across the new product lines,” the company “may need to re-evaluate where it resides as well,” he said.
