On Thursday, crypto exchange Coinbase reported a loss of $2.2 million in the third quarter, and its shares declined in after-hours trading.
This was after the company posted financial results that turned out to be better than expected for the third time in this year.
The breakdown
The loss stood at $0.01 per share on a revenue of $674 million, while analysts had been expecting the loss to be around $0.70 per share on a revenue of $670 million in the quarter.
During after-hours trading, there was a 4% decline in the shares of Coinbase, which trade under the COIN ticker on Nasdaq, as they dropped to $81.
During the same period last year, the losses of the San Francisco-based company had stood at $545 million, as there was a decline in crypto prices and revenue from transactions on its platform had reduced.
However, it seems that customers are finally warming up after a long crypto winter. During the earnings call, Brian Armstrong, the company’s CEO, talked about the company.
He said that in the early days of the internet, the companies that had focused on the future and ignored the noise had become tech giants.
He stated that the on-chain companies that exist today would become the tech giants in the future.
More numbers
The crypto exchange revealed in a letter to shareholders that it had generated $115 million in terms of revenue from transactions in the month of October.
Nonetheless, it still asked investors to exercise caution when extrapolating the said results. The transaction revenue in the third quarter stood at $279 million.
This was a consecutive decline from the revenue generated in the three months ending in June, when the revenue had stood at $327 million.
According to crypto experts, increasing digital asset prices support the business model of the crypto exchange, as they charge a fee on trades.
The explanations
Since the price of Bitcoin has risen now, Coinbase will see a greater number of transactions and this will give them a chance to exceed expectations in the future.
Anil Gupta, the Vice President of Relations at Coinbase, said that the low transaction revenue was due to the low volatility seen in the crypto market since 2017.
During previous earnings call, the company has asserted that volatility also contributes to activity on the exchange and not just rising prices of cryptocurrencies.
According to analysts, the primary reason why Bitcoin has been enjoying a recent rally to the $35,000 mark is due to the anticipation of the launch of a spot Bitcoin ETF.
In addition, it should be noted that a number of asset managers, including BlackRock, have reached out to Coinbase to serve as custodian in their spot Bitcoin applications.
This would also benefit the crypto exchange because it would be holding onto Bitcoin as collateral on behalf of the asset managers who are issuing the investment product tracking the price of the asset.
Coinbase said in its letter to shareholders that Base, its layer-2 Ethereum solution, which was launched earlier in the year, was also showing early utility.