Shares of Coinbase, the American crypto trading giant, initially soared when it reported its Q4 2021 earnings today. Shares bounced around after the report. They were down about 5% in extended trading by the end of executives’ call with analysts.
The company bested investor expectations in the trailing period. However, citing a “decline in crypto asset volatility and crypto-asset prices”. Coinbase said that it expects retail monthly transacting users (MTUs, in its parlance) and total trading volume to decline sequentially in the first quarter
On the company’s Q4 analyst call, CEO Brian Armstrong shot down the idea that the sector could be entering a new “crypto winter,” which is essentially a bear market. Armstrong said that’s because cryptocurrency now has significant use cases, unlike in earlier cycles of crypto winters and summers.
Financial Highlights
MTUs grew to 11.4 million in Q4, up from 7.4 million in Q3. That came after Coinbase saw a decline in MTUs between Q2 and Q3.
In the fourth quarter of 2021, Coinbase generated $2.50 billion in total revenue, up from $585.1 million in the year-ago quarter. The company’s massive growth in top-line led to huge profitability gains.
Retail transaction revenue in Q4 was $2.2 billion, up 114% compared to Q3. All-time high crypto prices and higher levels of crypto asset volatility contributed to higher transaction revenue per retail MTU in Q4 compared to Q3.
Its net income soared from $176.8 million in the final three months of 2020 to $840.2 million in Q4 2021. The company also reported GAAP earnings per share of $3.92, on a diluted basis, in the final quarter of last year.
What’s Next
Coinbase warned shareholders in the previous quarter that its stock should be considered a long-term investment since its business is “volatile.”
Coinbase warned in its letter to shareholders that 2022 will continue to have a fair amount of uncertainty for its business.
The company predicted retail monthly transaction users (MTUs). The total trading volume during the first quarter would be lower than the prior period.
Coinbase attributed the change to decreased crypto asset volatility and a 20% decrease in crypto market capitalization quarter-to-date. It said the declining market cap is driven by macroeconomic factors like geopolitical instability and the U.S. Federal Reserve signaling a tightening of financial conditions.
Here’s what Coinbase told investors it is seeing in Q1 2022:
The total trading volume of $200 billion to date, appears to have the company on a pace to dramatically undershoot recent quarters’ volume figures (see above table).
Lower “subscriptions and services revenues” than in the fourth quarter, which along with the above datapoint underscore the fact that Coinbase appears set to shrink sharply in top-line terms in Q1 2022 compared to Q4 2021.
