Most of the assets in the cryptocurrency market, especially Coinbase, continue to decline in value. Also, the sharp bearish trend is creating tough conditions for almost all the firms. The overall effect results in adverse reports on the performance of the companies.
Recently, the most prominent US crypto exchange, Coinbase released its report for the third quarter of 2022. However, the data regarding its revenue is not impressive. Furthermore, the exchange recently published its 3Q report, which did not live up to the expectations of most analysts.
according to informationCoinbase’s revenue declined 50% from last year’s value due to volatility in trading activity. Therefore, the firm reported a loss of approximately $545 million compared to a profit of $406 million in the third quarter of 2021.
Unfavorable macroeconomic conditions contribute to revenue decline
Coinbase wrote for shareholders With regard to the fall in revenue. It pointed out that unfavorable macroeconomic conditions and dwindling crypto market created a negative stance for the firm. Therefore, the company’s trading volumes fell sharply, leading to a drop in its revenue.
Typically, exchanges derive around 90% of their profits from their trading fees, which are higher than the industry average. But, the bearish crypto market is not helping its activity.
Its Q3 transaction revenue is $366 million in the company’s reported details. This indicates a decline of about 44% from the second quarter. But it posted a 43% increase in subscription and service revenue as the value reached $211 million. As a result, total revenue for the third quarter decreased 28% from Q2 2021.
The company reported a loss of $116 million to its earnings before interest, taxes, depreciation and amortization (EBITDA). The value fell in 2021 from $618 million received during the same quarter.
Trading volume declined 27% to $159 billion against $217 billion in the previous quarter. Ethereum showed higher performance than Bitcoin. It contributed 33% of the firm’s total trading volume for the period, while bitcoin accounted for 31%.
In addition, the firm noted that its trading volume has shifted significantly from the US due to greater concerns and some uncertainty about regulations. Coinbase explained that retail investors moved into holdings due to macroeconomic conditions, which reduced trading volumes.
Coinbase sees a drop in users and stocks
Additionally, Coinbase’s user base is declining. During the quarter, the firm noted around 8.5 million monthly transactional users (MTU) as against 9 million and 9.2 million in Q2 and Q1 respectively.
The firm said 2023 could bring more uncertainty. It added that their preparations for the next year are accompanied by a perception of more extreme macroeconomic conditions with a conservative bias.
This year is also declining on Coinbase stock. Due to persistence in the bear market and the firm’s shift from riskier assets, its stock has declined by three-quarters of its value since January 2022.
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