Coinbase struggles amidst cryptocurrency market downturn and major bankruptcies

Coinbase Global Inc has reported a loss in Q4 of the year, due to the downward pressure on trading volumes at the cryptocurrency exchange that was prompted by a string of high-profile bankruptcies in the digital assets market.

The sector has been plagued by low investor confidence over the past year, but the biggest blow to the industry came from the collapse of Sam Bankman-Fried’s major crypto exchange, FTX, in November. Despite this, Chief Executive Brian Armstrong believes that the increased regulatory scrutiny in the wake of the FTX failure and other crypto company failures will eventually be beneficial for Coinbase.

In Q4, trading volume at the exchange dropped sharply to $145 billion, compared to $547 billion in the previous year. Additionally, retail traders’ trading volume in the quarter plummeted nearly 89 percent to $20 billion.

However, Coinbase’s subscription and services revenue increased by approximately 33 percent to $282.8 million in Q4, benefiting from hefty interest rate hikes, offering a bright spot amidst the downturn.

Shares in Coinbase experienced some volatility in after-hours trading but ultimately saw a marginal increase. The company’s Q1 forecast for subscription and services revenue is estimated to be between $300 million and $325 million, which is higher than Wall Street’s forecast of approximately $285.7 million, according to Refinitiv data.

Oppenheimer analyst Owen Lau told Reuters that he believed the report was encouraging, and the guidance was supported by expense control and improving revenue trends. In Q4, Coinbase reported a net revenue of $605 million compared with $2.49 billion the previous year, and a net loss of $557 million compared to a profit of $840 million the year before.