Coinbase Narrows Q3 Losses despite a Declining Transaction Revenue

Coinbase (Nasdaq: COIN) published its financials for the third quarter of 2022, reporting net revenue of $576 million. The figure dropped by more than 28 percent from the previous quarter and 53 percent from Q3 2021.

The cryptocurrency exchange also reported a net loss of $545 million for the quarter. However, it managed to narrow the losses from the previous quarter’s loss of more than $1 billion. In addition, the company posted a loss of $430 million in the first quarter of this year, whereas it ended the third quarter of 2021 with a profit of $406 million.

The result brought a positive sentiment to the investors of Coinbase despite the losses. The price of Nasdaq-listed shares of the crypto exchange jumped by almost 5 percent in after-market trading after the markets closed on Thursday.

The business models of cryptocurrency exchanges are facing the headwinds of macroeconomic woes and the downturn in the crypto market. While most prominent crypto exchanges are held privately, Coinbase is one of the few to post its figures due to its obligations.

Declining Trading Activities

Coinbase's subscription and services revenue between July and September came in at $211 million, which is higher than the previous quarter’s 147 million. However, the transaction revenue for the quarter came down 44 percent quarter-over-quarter to $366 million. It was driven down by a lower trading volume that came in only at $159 billion compared to $217 billion in Q2 and $327 billion in Q3 2021.

Though the number of monthly transacting users (MTU) improved year-over-year to 8.5 million from 7.3 million in a similar quarter of the previous year, it had declined drastically from recent quarters: the MTU for Q2 2022 was at 9 million.

“Crypto trading activities have been increasingly moving away from US-enabled exchanges, where we continue to have strong market share,” the exchange highlighted. “US policy should incentivize crypto market participants to operate in the US, but a policy of regulation by enforcement has the opposite effect.”

The exchange is now expanding its international footprint and is focused on gaining regulatory permissions in overseas markets. It recently received regulatory approval in Singapore and multiple licenses in Europe.

The exchange expects to close 2022 with a $500 million adjusted EBITDA loss. “This assumes that crypto market capitalization and volatility do not deteriorate meaningfully below October levels and that we do not see changes in customer behaviors,” the exchange added. “For 2023, we’re preparing with a conservative bias and assuming that the current macroeconomic headwinds will persist and possibly intensify.