Coinbase Income Beats Wall Street Estimates

  • Despite not yet having Dogecoin listed on its exchange, cryptocurrency exchange Coinbase Global beats analyst estimates for net income 
  • Coinbase will need to move fast to acquire greater institutional investors, if it is to stand out in an increasingly competitive space
 
 
Not bad for a cryptocurrency exchange that doesn’t list Dogecoin.
 
After market hours on Thursday, Nasdaq-listed cryptocurrency exchange Coinbase Global (-6.53%), the largest U.S. cryptocurrency exchange, reported net income above Wall Street estimates.
 
Reporting total sales of US$1.8 billion, in line with its April guidance, Coinbase Global’s net income of US$771 million fell into the middle of the guidance range of between US$730 million to US$800 million, but exceeded analyst estimates of US$762.6 million.
 
Coinbase reported first quarter earnings just a day after Elon Musk announced that Tesla (-3.09%) would no longer be accepting Bitcoin as payment for its electric vehicles, citing concerns over the use of fossil fuels to support the mining of Bitcoin.
 
Bitcoin has since fallen below the US$50,000 level of support and continued to show weakness in Friday’s Asian morning trade.
 
Coinbase shares, which debuted at US$381, have struggled since its direct listing on Nasdaq.
 
Some analysts suggest that by not listing Dogecoin, Coinbase missed out on the rally in the meme cryptocurrency as well, but the cryptocurrency exchange has already announced plans to include Dogecoin on its exchange within the next six to eight weeks. 
 
Regardless, Coinbase Global increased its expectations for the full year for monthly transacting users, as the number of such customers rose to 6.1 million in the first quarter, more than double the prior quarter.
 
In the current, second quarter, Coinbase Global expects its total trading volume to meet, or slightly exceed its first-quarter trading volume.
 
But investors should anticipate that profitability at the cryptocurrency exchange will drop, with the company warning that it will be focusing on expansion and investing in sales and marketing,
 
“We seek to operate the company at roughly break even in terms of profitability, smoothed out over time, for the time being.”
 
With over US$2 billion in cash and equivalents, Coinbase Global has a substantial war chest for acquisitions and as many cryptocurrency startups grow, more than a handful will be ripe to be folded into Coinbase Global.
 
Nonetheless, Coinbase still faces strong headwinds, both from competition – there is more than an outside chance that Binance, the world’s largest gray-market cryptocurrency exchange, could seek to be regulated in multiple jurisdictions – as well as investors who were actively trading during the pandemic, dropping off.
 
Whilst other cryptocurrency exchanges are very nimble, listing fresh assets and non-fungible tokens or NFTs at a drop of the hat, offering decentralized finance or DeFi listings on the turn of a dime, Coinbase moves far more slowly.
 
Even its Dogecoin listing is expected to take as long as two months, which in the cryptocurrency space is an eternity.
 
One way that Coinbase could set itself apart from other cryptocurrency exchanges though is its ability to appeal to institutional investors.
 
While most of Coinbase Global’s current revenues come from retail users, institutions still account for most of the assets that it holds under management.
 
But if Coinbase wants to appeal to the institutional-side of the market, perhaps it’s understandable if it’s not in a rush to list Dogecoin.  
 

Novum Digital Asset Alpha is a digital asset quantitative trading firm.

Exclusive access to Novum Digital Asset Alpha’s Daily Analysis is made in conjunction with Bitcoin Malaysia.

The information and thoughts laid out in this analysis are strictly for information purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws.

It does not constitute a recommendation or take into account the particular allocation objectives, financial conditions, or needs of specific individuals.

For more information about Novum Digital Asset Alpha, please click on the image below:

Leave a comment

19 − six =

This site uses Akismet to reduce spam. Learn how your comment data is processed.