There were no surprises to be gleaned from Coinbase’s third-quarter earnings call.
Transaction revenues were down 44% quarter on quarter (QoQ), while overall net revenues were down approximately 28%.
Monthly transacting users and trading volumes were both down QoQ.
Yet the institutional cryptocurrency exchange managed to cut quarterly losses by 50% at the expense of a reduced workforce and a 38% reduction in operating expenses.
Net loss was US$545mln and adjusted EBITDA was negative US$116mln.
One saving grace for the struggling exchange is its US$5bn cash position.
Though that has been reduced from over US$6.3bn year on year, it still suggests a viable cash runway for the near future.
It will no doubt come in handy, given the company’s pragmatic outlook.
“Due to our expense actions, we remain cautiously optimistic for our ability to
operate within the US$500mln adjusted EBITDA loss guardrail that we communicated for 2022,” the company told shareholders, adding: “This assumes that crypto market capitalisation and volatility do not deteriorate meaningfully below October levels and that we do not see changes in customer behaviours.”
One hell of an assumption, one might say, but in fairness, the crypto markets are seeing some tailwinds of late.
With bitcoin and ether having stabilised at key support levels, and a period of historically low volatility continuing, there’s a feeling that the bottom has been reached.
There’s one other ray of hope, and it has to do with Coinbase’s client mix.
While retail trades still comprise the majority of Coinbase’s revenues, institutional investors are responsible for 80% of trading volumes.
It is here where Coinbase has a tactical advantage: While retail sentiment remains low, there are signs that bearish sentiment among institutional investors is falling away, as proved by the large outflows in short-Bitcoin positions among the largest asset funds.
Yes, however battered and bruised, Coinbase will probably make it out of this dark winter alive.
A dovish Federal Reserve pivot wouldn’t hurt either, though that is probably still a while off.