Coinbase Warns of Losses In Q3 Despite Surpassing Expectation in Q2

• Coinbase is expecting to record losses in trading volume and monthly transaction users (MTUs) in the third quarter.
• The exchange recorded 6.3 million MTUs in July and $57 billion in trading volume. 

Although US crypto exchange Coinbase recorded gains in the second quarter, the Exchange has predicted that there may be losses in the third quarter. During the last quarter, Coinbase exceeded market expectations, increasing nearly 38 percent in trading volumes on a sequential basis. 

Coinbase forecasts losses in the third quarter

The growing adoption of digital assets has been influencing the profits generated by Coinbase. The Exchange sees gains from feed charged on trades which increases by the day. However, Coinbase is poised to suffer some losses this third quarter due to regulation issues facing the crypto space. Coinbase is expecting that there will be a reduction in trading volumes compared to the second quarter. 

According to Coinbase, monthly transaction users (MTUs) are also expected to reduce in the third quarter. The crypto exchange giant noted that MTUs in July were 6.3 million while trading volumes were $57 billion as the prices of crypto assets fall “significantly.”

Speaking on the possibility of losses for the firm, the chief financial officer (CFO) Alesia Haas said Coinbase is considering the action of the US watchdog. Last week, the chair of the US Securities and Exchange Commission (SEC), Gary Gensler, called on Congress for more authorization on stricter policing on the crypto market. Coinbase CFO said that the Exchange is attentive to the call for more authority to police crypto lending, trading, and platforms. In a post-earnings call with analysts, the Coinbase executive continued:

We’re eager to understand the legal framework for the concerns that he has raised and how any of those may impact our product road map.

Coinbase’s performance in the second quarter

After Coinbase went public through a direct listing in April, the crypto Exchange saw a wild upswing in revenue. The Exchange revenue climbed more than 1,000 percent as net revenue grew from $178 million to $2 billion year on year. 

Reports showed that a jump in trading volume caused the revenue gain. In the quarter, the exchange recorded an increase in revenue from $28 billion a year before to $462 billion. At the same time, the platform saw a surge in monthly transacting users, rising from 1.5 million to 8.8 million. Coinbase said the strong MTU could be tied to the crypto market environment and the launch of new products. The Exchange further added that the increase in listed crypto assets on the platform influences MTU. 

Furthermore, Coinbase is looking at adding to the number of listed assets on its platform. The Exchange CEO Brian Armstrong revealed his desire for Coinbase to be the “Amazon of assets.”. Armstrong said he wants Coinbase to have all legal crypto assets listed on the platform. 

Commenting on the rise in global adoption of crypto assets, Coinbase stated:

Q2 was a strong quarter for Coinbase with a record number of users engaging more deeply in our products and services. A recent survey from the University of Chicago suggests 13% of Americans have traded crypto assets in the last year compared to 24% for stocks. These adoption trends paired with recent government attention on crypto as a revenue source suggests we have reached an inflection point. Crypto has arrived.