Crypto Winter May Be Harsh for Coinbase
Categories: Crypto News US
The number of monthly transacting users fell more than 2 million from the fourth quarter to the first, to 9.2 million. Trading volume slid by 44% over that period and total transaction revenue was 56% lower. The company said crypto volatility continued to decline into April, hitting the lowest level since mid-2020, and it expects lower monthly transacting users and trading volumes in the second quarter.The company has long been anticipating another possible deep-freeze period for crypto activity. Chief Executive Brian Armstrong said on the company’s earnings call on Tuesday that Coinbase COIN -26.40% has been through crypto’s past cycles, and that he now sees an opportunity to focus on building for the future rather than scrambling to keep up with frenzied activity. “Ironically, I’ve never been more bullish on where we are as a company,” he said. Still, that resilience was counterbalanced in the quarter by a decline in the rates institutions paid. Institutional transacting makes up the bulk of Coinbase’s volume, though it generates a fraction of the revenue that retail does. The institutional fee rate fell over the course of the first quarter, which the company attributed to a change in the fee structure for market makers. Institutional trading also represented an even bigger share of volume than in recent quarters. The number of Coinbase users engaged with yield-generation products rose from 3.6 million to 5.8 million during the most recent quarter, which the company said was largely driven by the launch of “staking” in the Cardano blockchain network. Staking is a way to earn a form of yield by getting rewards for participating in a network. On average in the first quarter, more than half of monthly transacting users were using products beyond trading, such as staking, the company said. Nontransaction subscription and services revenue fell 29% from the fourth quarter to the first, though it was still close to triple what it was a year ago. Still, the future potential of crypto yield has its own uncertainties. For one, there are the regulators: Coinbase didn’t launch an anticipated yield-paying lending product last year after the Securities and Exchange Commission threatened enforcement action. It isn’t yet clear how or in what form such offerings may return. People also can seek yield in the wider “decentralized finance” ecosystem, but some may be more reluctant to do so after the volatility surrounding TerraUSD. Among the drivers of the algorithmic stablecoin’s recent growth was its use in a lending protocol that allowed investors to earn returns of nearly 20% annually.Coinbase may be smart to plant seeds for growth before winter arrives. But investors shouldn’t start dreaming of spring flowers yet.