Coinbase Global (COIN), the largest cryptocurrency exchange in the country, reported its seventh consecutive quarterly loss as both its trading volumes and number of users declined.
Investors responded by pushing the company’s stock down as much as 5% in after-hours trading, following a nearly 9% increase during regular trading hours on Thursday.
However, Coinbase’s third-quarter loss of $2 million exceeded Wall Street expectations and represents the closest the company has come to positive earnings since the fourth quarter of 2021.
“Amid multi-year low levels of volatility, we are pleased with our financial results,” said Coinbase in a statement.
Coinbase is currently engaged in a legal battle with the US Securities and Exchange Commission (SEC), which sued the exchange in June for operating an unlicensed cryptocurrency securities exchange, broker, and clearing agency. This legal dispute poses a risk to Coinbase’s future earnings. The company has chosen to defend itself in court, with CEO Brian Armstrong openly expressing his disagreement with the SEC. Oral arguments for the case are set to be heard on January 17 in a Manhattan courtroom.
In addition to the legal challenges it faces, Coinbase is actively lobbying for clearer regulations surrounding the cryptocurrency industry.
“While legislation can be slow and unpredictable, we are still optimistic that the US will make the right decisions,” the company stated.
Despite these legal and regulatory obstacles, Coinbase’s stock has experienced a 128% increase since the start of the year. This growth is attributed to the year-long rally in bitcoin and other digital assets, fueled by speculation that the SEC may approve spot bitcoin exchange-traded funds (ETFs) that would provide investors with exposure to the cryptocurrency without ownership.
During the third quarter, Coinbase saw a decrease in the number of users transacting on its platform, reaching levels not seen since the first quarter of 2021. The company’s trading volume also declined by over 17% compared to the previous quarter and 52% compared to the same period last year.
“While rising retail take rates may have saved the day in the quarter, the underlying fundamentals at COIN continue to worsen,” noted Mizuho Securities analyst Dan Dolev, pointing to the lower trading volumes.
Coinbase’s transaction revenue fell to $288 million, a 21% decrease compared to the same period last year and the lowest quarterly results for its trading platform in two years. Additionally, the company’s monthly transacting users fell to 6.7 million, a 21% decline compared to the second quarter of last year and an 8.2% drop compared to the previous quarter.
However, Coinbase’s subscriptions and services revenue increased by 59% from the second quarter of last year, reaching $334 million. This growth was driven by revenue generated from Coinbase’s stablecoin and interest income streams.
Although the company’s net revenue rose 5.5% compared to the year-ago period, it did not meet analysts’ high expectations.
Meanwhile, operating expenses decreased by 4% compared to the previous quarter and 32% compared to the year-ago period, amounting to $754 million. This decrease was primarily due to the timing of certain sales, marketing, and legal-related expenses.
David Hollerith is a senior reporter for Yahoo Finance covering banking and cryptocurrency.
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