COIN Briefly Pumps After Better Than Expected Q4 Earnings Report

Crypto exchange Coinbase reported net revenue of $605 million in Q4 2022, according to its latest earnings report published after the bell on Tuesday.

Since its release, COIN shares briefly jumped 3% to $64 before falling back to $62 in after-hours trading. 

Coinbase Survives the Bear

The exchange’s latest numbers present a 5% boost compared to the previous quarter’s $576 million figure, and a touch above analysts’ estimates of $588 million. 

According to the company’s filing, over half of that revenue ($322 million) was generated from transactions, while the rest came from subscriptions and services ($283 million). The former rose 12% from the prior quarter, while the latter rose by 38%. 

Nevertheless, on an annualized basis, net revenue fell from $7.4 billion in 2021 to $3.1 billion in 2022 – a reflection of slowing activity across the entire industry. 

“Idiosyncratic events throughout 2022 exacerbated already weak macro conditions,” the company wrote. “However, Coinbase and the crypto economy have proven to be resilient, and long-term fundamentals remain strong.”

Coinbase’s total operating expenses rose 3% since Q3 – a figure that would have been down 1% if not for the exchange’s $50 million NYDFS settlement in early January. The department accused Coinbase of not conducting necessary background checks on its customers, exposing the firm to criminal activity including possible money laundering and suspected child trafficking.  

However, the company has taken other measures to keep expenses down in Q1 2023, including a 20% headcount reduction and other cost management efforts. By the end of the quarter, it expects a 25% cost reduction from Q4 2022 when excluding the NYDFS settlement. 

Regulation is Coming

The report also noted that 2023 is likely to be a “significant year for crypto policy in the United States and abroad.” Conversation on the subject has gained more attention following FTX’s collapse last year, inciting action from regulators that Coinbase is not fond of. 

“Coinbase has concerns about those actions that appear more designed to be punitive and reactive than to address actual consumer interests and the reality of how crypto works,” said the company. 

Coinbase CEO Brian Armstrong spoke out against the SEC’s recent crackdown against Kraken’s staking service, which he believes did not violate securities laws. His company also denied that stablecoins like BUSD constitute securities after the SEC issued a Wells notice to the asset’s issuer, Paxos, claiming as much.