CEFI

Coinbase reports a $300 million loss in 2022, better than market expectations, with its stock price slowly recovering from the lows.

2023/2/22

The U.S. compliant exchange Coinbase released its fourth-quarter and full-year financial report for 2022 yesterday, stating that despite a 64% decrease in the overall cryptocurrency market value in 2022, Coinbase and the crypto economy have shown resilience, with long-term fundamentals remaining strong. Coinbase reported an adjusted EBITDA loss of $371 million in 2022, lower than the $4 billion profit in 2021 but better than market expectations, aligning with CEO Brian Armstrong's previous shareholder letter mentioning a loss of less than $500 million.

Note: EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, which represents a company's operating performance as it excludes interest, taxes, depreciation, and amortization.

Table of Contents

Earnings Analysis: Decrease in Trading, ETH Rewards, USDC Interest

In terms of revenue, due to the overall market conditions, trading revenue decreased by nearly 2/3 compared to 2021, leaving only $2.3 billion. However, revenue from other subscription services has increased.

In the fourth quarter, blockchain reward revenue decreased by 1% quarter-on-quarter to $62.4 million, accounting for 10% of net revenue. Although the total assets supported for staking increased in the fourth quarter, the lower average prices of cryptocurrencies led to a decrease in numbers. The largest staked asset on Coinbase is ETH, with a value of approximately $3 billion as of December 31. Coinbase expanded its ETH staking services to Canada and Australia in the fourth quarter of last year. Looking at the entire year, despite the decline in cryptocurrency prices, overall blockchain reward revenue has increased compared to 2021.

The source of the largest increase in revenue is interest income. Interest income in the fourth quarter increased by 79% compared to the third quarter, reaching $182 million, of which $146 million came from USDC. The main factor driving the growth is the continuously rising interest rate environment, with annual interest income reaching $320 million. Note: Coinbase and Circle jointly established the Centre Consortium, which created USDC, with Circle being the first issuer.

Expense Analysis: Settlement Fees, Workforce Reduction

In terms of expenses, excluding the $50 million settlement fee with NYDFS, overall expenses have not increased significantly. However, in 2022, Coinbase underwent large-scale expansion. After facing several crypto storms, Coinbase implemented difficult but cautious actions to lay off employees and restructure the company for improved efficiency at the beginning of this year. CFO Alesia Haas stated in an interview with Bloomberg that if necessary to improve the company's financial performance, Coinbase does not rule out further layoffs. The company's current focus is on maintaining positive EBITDA.