Coinbase Rocks as Key Earnings Metric Spoils Futures Launch Rally; Start of SBF deliberations

Coinbase stock fell Thursday evening after its earnings report showed a significant decline in cryptocurrency trading volume. Actions Coinbase (PIECE OF MONEY) rallied in trading after the cryptocurrency exchange began offering cryptocurrency futures late Wednesday to eligible U.S. retail customers. Bitcoin and cryptocurrency prices fell from overnight highs on Thursday morning. Elsewhere, the verdict in the trial of former FTX CEO Sam Bankman-Fried could be delivered as soon as this afternoon.

Coinbase Earnings

The crypto exchange reported a loss of 1 cent per share, an improvement from a loss of $2.43 per share last year. Total revenue jumped 14% to $674.1 million, ending a six-quarter streak of double-digit declines.

Analysts surveyed by FactSet expected Coinbase to report a loss of 55 cents per share on revenue growth of 10.4% to $651 million.

Total transaction revenue fell to $288.6 million from $327.1 million and $365.9 million a year ago. FactSet guided trading revenue at $276 million.

Consumer transactions revenue fell to $274.5 million, beating estimates of $256 million. Institutional trading revenue came in at $14.1 million, below forecasts of $15 million.

Subscription and services revenue was $334.4 million, essentially flat quarter-over-quarter and up nearly 59% from 2022. FactSet forecast subscription revenue of $323 million.

Total trading volume fell to $76 billion in the third quarter, from $92 billion in the second quarter and $159 billion a year ago.

Retail trading volume fell to $11 billion, down 21% from last quarter and almost 57% from the same period last year.

Institutional trading volume declined 17% quarter-over-quarter to $65 billion. Coinbase reported institutional trading volume of $133 billion in 2022.

The company saw flat subscription and services revenue in the fourth quarter compared to the third quarter and noted that it generated $105 million in transaction revenue in October.

Crypto Futures Launch

The publicly traded crypto exchange announced late Wednesday that eligible customers in the United States can now trade futures contracts tied to bitcoin and ether, Ethereum’s token, through Coinbase Financial Markets.

Futures contracts allow investors to speculate on future price movements. Contracts are agreements to buy or sell an asset or security at a specified price and date. Coinbase also offers leveraged trading, which allows investors with borrowed funds to increase their trading position, but carries higher levels of risk.

The new contracts are “specifically sized for retail traders,” Coinbase wrote in the release. Bitcoin futures contracts are 1/100th of a bitcoin while ether contracts are 1/10th of Ethereum.

The company received regulatory approval in August from the National Futures Association, an organization designated by the U.S. Commodity Futures Trading Commission. At the time, Coinbase reported that the crypto derivatives market represented approximately 75% of global crypto trading volume.

Coinbase Stock, Bitcoin Price Action

COIN stock fell more than 4% late Thursday. Shares rose nearly 9% on Thursday ahead of the report’s release, marking its fourth straight day of gains. The stock is up 139% so far in 2023, as the price of bitcoin and other cryptocurrencies has risen following a series of victories in regulatory courts and hopes a spot bitcoin ETF will be launched soon.

Bitcoin traded below $35,000 on Thursday evening after hitting $35,938 overnight – its highest level since May. The world’s largest cryptocurrency has more than doubled so far in 2023.

Ethereum was hovering around $1,800 on Thursday, down from its high of $1,874 on Wednesday evening. ETH is trading around its mid-August levels and is up around 50% so far this year.

Grayscale Bitcoin Trust (GBTC), which Grayscale Investments hopes to convert into a spot bitcoin ETF, rose slightly on Thursday.

Bitcoin miner Digital marathon (MARA) jumped more than 10%.

SBF Trial Update

Elsewhere, the verdict in the trial of FTX founder Sam Bankman-Fried could be delivered as soon as Thursday afternoon. Jury deliberations began Thursday morning after the defense and prosecutors presented closing statements Wednesday. Deliberations will resume Monday if no verdict is rendered Thursday.

Crypto tycoon Bankman-Fried, commonly known as SBF, faces multiple fraud charges for his role in last year’s stock market collapse. He pleaded not guilty to seven counts including conspiracy, wire fraud and securities fraud in December. He potentially faces up to 115 years in prison if convicted.

SBF testified for three days preceding the closing arguments, including two days of cross-examination. Bankman-Fried repeated previous statements that he was not involved in day-to-day business decisions at Alameda Research and did not recall many statements made in interviews or his testimony before Congress. the Wall Street Journal reported. He denied committing fraud, but admitted mistakes that harmed investors. The prosecution and Assistant U.S. Attorney Danielle Sassoon attempted to portray his public comments and social media posts as misleading statements or outright lies.

The trial included testimony from FTX Co-Founder and CTO Gary Wang, Director of Engineering Nishad Singh, and Caroline Ellison, CEO of Alameda Research. The group pleaded guilty and agreed to help prosecutors.

Ellison, Bankman-Fried’s on-and-off girlfriend, testified that SBF knowingly ordered Alameda Research to commit crimes.


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