Coinbase Reports Struggles in Fourth Quarter
On Thursday, Coinbase disclosed that its revenue for the fourth quarter hit $1.78 billion, highlighting ongoing difficulties for the business. This figure marks a 22% decline from the same quarter last year, and notably, it also fell short of analysts’ predictions, which had anticipated $1.84 billion.
The company’s net loss totaled $667 million for the fourth quarter, a stark contrast to the $1.3 billion profit reported during the same period last year, which coincided with President Trump’s reelection.
Coinbase attributed its losses to a $718 million drop in the value of its investment portfolio, primarily unrealized losses. Additionally, the value of its strategic investments, including Circle, experienced a $395 million decline.
Anil Gupta, Coinbase’s vice president of investor relations, noted that while the company doesn’t actively trade digital assets within its investment portfolio, it might liquidate some assets depending on operational needs. “It’s more of a buy-and-hold situation,” he mentioned, adding that they don’t typically sell portfolios just for recognition of gains.
Despite these setbacks, Coinbase generated $983 million in revenue from customer transactions, which is a slight drop from $1 billion in the third quarter. Trading revenue had peaked at $1.56 billion in the previous fourth quarter, post-Trump’s election victory.
In the lead-up to the earnings announcement, Coinbase stock dipped 7.9% to $141, reflecting overall volatility, as the stock has plummeted over 55% in the last six months amid pressures on the cryptocurrency market. However, after the earnings report, it showed some recovery, rising above $142.
Coinbase reported holding $11.3 billion in cash and equivalents, indicating they are “intentionally well-capitalized” to navigate the current crypto market cycles. Even with efforts to diversify its offerings, recent results revealed a heavy reliance on transaction fees from customers, leaving the company exposed to fluctuations in the cryptocurrency market.
Nevertheless, Coinbase did see stablecoin revenue reach $364 million in the fourth quarter, up from $226 million a year earlier, largely due to a revenue-sharing agreement with Circle for USDC reserves.
This revenue, along with staking, contributes to exchange subscriptions and services. Coinbase reported earning $151 million from blockchain rewards, which are earned as users participate in transaction validation.
In a letter to shareholders, Coinbase emphasized its growth, citing 12 products that each bring in over $100 million annually. David Bartosiak from Zacks Investment Research noted that these initiatives could help mitigate the impact of the current downturn in crypto markets.
Gupta also pointed out that Coinbase is evolving. “This is a fundamentally different business than it was a few years ago,” he reflected. The company is further focused on derivatives, having acquired Deribit for $2.9 billion last year, and reported record trading volumes for quarterly derivatives, despite unfavorable market conditions.
Earlier this week, analysts at JPMorgan lowered their target price from $399 to $290, citing decreased trading volumes and a fall in cryptocurrency market capitalization during the fourth quarter.
Some analysts, like Kevin Heale from Argus Research, suggested that there were signs Coinbase might not meet expectations, noting they had asked analysts to submit questions prior to the earnings call—something he hadn’t seen before.
Coinbase continues to emphasize its Base Ethereum Layer 2 scaling network to strengthen its decentralized finance capabilities, hinting at plans to create a value-driven network token valued between $12 billion and $34 billion.
Looking ahead, Coinbase generated $420 million in trading revenue through February 10, suggesting an uptick in buying activity amid the recent market downturn. Gupta commented that retail clients seem to be holding onto their assets, with notable purchase activities observed from customers during the current quarter.
Note: This report was updated after publication to include further details and comments from Coinbase.
