TL;DR Breakdown
- Coinbase’s Q3 report noted that its revenue fell short of projected figures.
- Following the report, their shares plunged significantly.
- Despite the Q3 trends, Coinbase remains hopeful.
Shares of Coinbase have taken a nosedive after the cryptocurrency exchange reported less than expected figures in their third-quarter report on Tuesday. After setting a new high yesterday, the publicly-traded company saw its shares price drop more than 13%. Total revenue fell to $1.31 billion from $2.23 billion in the prior quarter, also missing estimates of $1.57 billion.
The reason given by those in the crypto space is that crypto exchanges have benefited from the mainstreaming of digital assets, with businesses across the globe investing heavily into growing their crypto infrastructure. We have observed that profitable crypto investments include crypto news sites and crypto exchanges. Some form of oversight on crypto trading and products were triggered after the slide in bitcoin prices earlier this year.
Poor Q3 performance was to blame
As explained by the report, the drop shortfall was due to low prices in the cryptocurrency market during the quarter. Recall that from July to September, the market experienced some turbulence. Due to this, they note that their monthly transacting users fell from 8.8 million in Q2 to 7.4 million in Q3. Trading volume also fell from $462 billion to $327 billion between the quarters.
The dip in its stock price is the lowest single-day drop since its Initial Public Offering in April. Coinbase is, however, undisturbed by the missed revenue target. The company already previously noted that it expected this to be the outcome for Q3 back in August as it was expecting lower trading volumes. The exchange even beat its predicted trading volume for Q3.
Added to their expectations of low trading volumes during the quarter, Coinbase also had its fair share of troubles that could have contributed to their falling short of the revenue target. The SEC’s threat to take legal action against the firm led to their discontinuing plans to launch a lending and borrowing platform back in September.
Coinbase remains hopeful
Coinbase remains hopeful for the long term, however. The exchange remains the leading cryptocurrency exchange in the U.S. and has seen its popularity increase recently when it skyrocketed to become the most downloaded mobile application on Apple’s App Store. Their leading position has made them a gateway for most institutional investors looking to adopt crypto, and they encouraged their investors to take a long-term view.
Coinbase has not been alone in facing challenges recently. Binance, the largest crypto-exchange by trading volume globally, also had numerous run-ins with regulators. During the crackdown on the cryptocurrency industry in China, many crypto-exchanges also faced the heat, with most of them closing their businesses or exiting the hostile country.
We can observe the same trends everywhere in space. The average number of daily comments this month on Reddit’s WallStreetBets forum, a hothouse for trading tips and memes, is about half what it was in November 2020, according to alternative-data provider Quiver Quantitative. The number of active users and funded accounts on Robinhood, the brokerage that’s become synonymous with the retail-trading boom, were also observed to have dipped in the third quarter.
What are the implications of the Q3 Revenue Dip? Please tell us in your comments below.
