When Coinbase, the American crypto trading behemoth, released its Q4 2021 earnings today, shares originally jumped, but investors rapidly sold off the gains, sending the stock price down by as much as 9%, hovering just above an all-time low. In the preceding period, the firm outperformed investor expectations. Coinbase, on the other hand, anticipates retail monthly transacting users (MTUs) and total trading volume to fall sequentially in the first quarter, noting a “down in crypto asset volatility and crypto asset values.”
Coinbase made $2.50 billion in total revenue in the fourth quarter of 2021, up from $585.1 million the previous quarter. The company’s significant top-line growth resulted in massive profitability gains, with net income jumping from $176.8 million in the fourth quarter of 2020 to $840.2 million in the fourth quarter of 2021. In the fourth quarter of previous year, the firm generated diluted GAAP profits per share of $3.92. Coinbase was projected to announce $1.94 billion in sales and $1.85 in profits per share, according to analysts. However, we should note that sales and profit forecasts for Coinbase were very wide prior into its call, with revenue estimates ranging from $1.19 billion to $2.44 billion, according to Yahoo Finance statistics.
What can we learn about the crypto sector from the Coinbase quarter, aside from the numerical nuts and bolts of company finance? Lots. The following graph is jam-packed with data: In terms of volume, retail trading activity remains a fraction of institutional trading activity; keep in mind, however, that retail investors account for not just the great majority of Coinbase’s trading income, but also the vast majority of the company’s entire top line. Retail transactions earned $2.185 billion in revenue in Q4 2021, despite decreasing volume, whereas institutional trades only generated $90.8 million.
Moving on, Bitcoin’s era of dominance in terms of trading volume and income creation at Coinbase has come to an end. It simply linked the Ethereum blockchain in terms of trade volume and revenue. Finally, while the crypto industry may appear to revolve around only two blockchains and their connected initiatives at times, the Coinbase revenue story paints a completely different picture.
Coinbase blew beyond expectations, raked in big profits, and increased by a factor of ten from the previous quarter. So, why is the stock price falling? The answer is straightforward: the market is more interested in what you intend to do than what you have already done. In other words, excellent trailing performance can be overshadowed by guidance. The market had projected Coinbase to generate $1.69 billion in sales in Q1 2022 and $1.55 in earnings per share before it released its Q4 report. Were there any indications in the company’s estimates that it might not meet those goals?