Why Coinbase shares crashed on Wednesday

Volatility cuts both ways.

| More on:
Graph showing a fall in share price.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Coinbase Global (NASDAQ: COIN) sank 8% on Wednesday after the digital-asset trading platform's third-quarter results fell short of investors' expectations.

So what 

Coinbase's net revenue decreased by 41% sequentially to $1.3 billion. That was below Wall Street's estimates, which had called for revenue of roughly $1.6 billion. 

The cryptocurrency exchange's monthly transacting users fell to 7.4 million, compared to 8.8 million in the second quarter. Its trading volume, in turn, declined by 29% to $327 billion. 

Chief financial officer Alesia Haas said during a conference call with analysts that a more tranquil trading environment weighed on Coinbase's results. "The story of our third quarter really centers on lower volatility that we saw early in the quarter," Haas said. "Our monthly transacting users and trading volumes and, therefore, transaction fee revenue, all correlate with volatility."

All told, Coinbase's net income plunged 75% to $406 million.

Now what

Coinbase's fortunes are largely dependent on the continued success of Bitcoin and Ethereum, the two most popular and valuable cryptocurrencies. Bitcoin accounted for 19% of Coinbase's trading volumes in the third quarter, while Ethereum represented 22%. Thus, the recent rally in Bitcoin's and Ethereum's prices to new all-time highs bodes well for Coinbase's fourth-quarter results.

Looking further ahead, Coinbase's fate is likely to correlate with cryptocurrency adoption trends.

"Coinbase is not a quarter-to-quarter investment, but rather a long-term investment in the growth of the cryptoeconomy and our ability to serve users through our products and services," the company said in a letter to shareholders. "We encourage our investors to take this point of view." 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

Four investors stand in a line holding cash fanned in their hands with thoughtful looks on their faces.
Economy

Up 20% this year. Does the S&P 500 Index have more in the tank for 2024?

Will US stocks hold up after the election?

Read more »

two young boys dressed in business suits and wearing spectacles look at each other in rapture with wide open mouths and holding large fans of banknotes with other banknotes, coins and a piggybank on the table in front of them and a bag of cash at the side.
International Stock News

2 magnificent S&P 500 dividend stocks down 27% to 51% to buy and hold forever

These stocks hold potential to act as growth and income plays.

Read more »

A young female investor with brown curly hair and wearing a yellow top and glasses sits at her desk using her calculator to work out how much her ASX dividend shares will pay this year
International Stock News

One Wall Street analyst thinks this emerging Artificial Intelligence stock could rise 60% in the next year

SoundHound AI is on the doorstep of a big year.

Read more »

man looks up at apple on his head
International Stock News

Why did Warren Buffett sell more Apple shares?

Does Buffett know something we don't?

Read more »

A male party goer sits wearing a party hat and with a party blower in his mouth amid a bunch of balloons with a sad, serious look on his face as though the party is over or a celebration has fallen flat.
International Stock News

What snapped the S&P 500 winning streak last night?

The S&P 500 almost made October a winner, but fell at the final hurdle.

Read more »

Man going down a red arrow, symbolising a sliding share price.
International Stock News

Why Nvidia stock is sinking today

Investors were spooked by economic data and the ambitions of a deep-pocketed rival.

Read more »

Rede arrow on a stock market chart going down.
International Stock News

Why Microsoft stock is sinking today

Microsoft just beat quarterly earnings estimates. So why is the stock falling?

Read more »

US economy and sharemarket with piggy bank
Share Market News

Here's why Goldman Sachs sees a decade of lower returns ahead for US shares

Aussie investors have placed a lot of faith in US shares this year.

Read more »