As it reported lower than expected earnings, the exchange’s trading volume fell by around 44% between January-March.
The exchange volume slump was due to crypto markets being largely range bound for Q1. There were few opportunities for traders short-term, so the market was essentially locked in a narrow space. Coinbase gets as high as 85% of its revenues from transaction fees that are higher than the industry average, which has negatively impacted its profit over the period.
According to the Financial Times, the company posted net losses of $430 millions on May 10. This is far more than the $47 million Wall Street analysts expected,
Coinbase Revenue Slump
Analyst expectations of $1.5 billion were far exceeded by revenue declines of 35%, to $1.16 Billion. Although the firm blamed the decline in crypto markets and volatility in 2022, it was optimistic about the future.
“We believe that these market conditions will not last and we continue to be focused on the long-term.”
At 87%, revenue derived from transaction charges still accounted for the majority of the total. Rest came from subscriptions or services.
The crucial monthly transacting user (MTU), figure of 9.2 million has fallen nearly 20% from Q4 2021. Analysts had expected 9.5 million. Brian Armstrong, the CEO of Cryptocurrency, predicted earlier this month that there would be a billion users within the next decade.
The platform saw a drop in trading volume from $547 billion during Q4 2021, to $309 billion during the first quarter 2022. Only 24% of these totals were made up by retail traders. The vast majority of institutional traders make up the rest. The report showed that $235 billion was the volume of institutional trading, which is 37% less than Q4.
The platform’s assets also decreased by 8% during the same period. Funds on the platform stood at $256 billion at the close of Q1, compared to $278 billion at Q4. The report stated that the sequential decline was due to lower crypto asset prices. However, net inflows totaling billions of dollars offset this.
COIN Slumps to ATL
Coinbase stock fell to an all-time low due to the disappointing earnings report. After sliding 13% during the regular session, COIN fell 16% in after-hours trades Tuesday.
MarketWatch reports that the share price currently stands at $61.55. It has fallen 84% since its April 2021 peak of more than $400, when it was listed publicly.
The crypto markets have fallen by around half of their original highs in the same time period. The total market capitalization is currently at $1.47 trillion, a 10-month low.
Marla Brooks – Financial Analysis
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