Cryptocurrency exchange Coinbase Global Inc. has reported a fifth consecutive quarter of losses, with a net loss of $79 million in the first quarter of 2023. However, the result was better than expected, beating analysts’ predictions of a loss of $316 million or $1.45 per share.
Despite a recovery in crypto markets during the first quarter, customers and investors have fallen out of favor with the company, which has been mired in a regulatory quagmire and various lawsuits. The firm’s retail trading activity did not grow much in the first quarter, and its total trading volume fell to $145 billion for the period from $309 billion a year ago.
Revenue and Expenses
The company’s total revenue for the quarter was $772.5 million, 37% lower than the $1.1 billion in revenue for Q1 2022. However, total operating expenses were less than $900 million, resulting in an operating loss of $124 million. The losses were limited by a 20% cut in the Coinbase workforce in January.
Coinbase’s retail trading activity did not grow much in the first quarter despite a 50% gain for the crypto markets. Its total transaction revenue fell 63% to $375 million from more than $1 billion a year ago. However, Coinbase does have some of the highest fees in the industry, so savvy traders may have sought alternatives.
Regulatory Challenges
Coinbase is facing regulatory challenges, with threats of SEC enforcement action and various lawsuits looming over it. Chief Legal Officer Paul Grewal said the legal fight with the SEC could be lengthy, but the firm expects to be fully operational in the meantime. The firm was also hit with a lawsuit in which executives were accused of dumping millions in stock to prevent losses by insider trading.
Coinbase’s stock surged almost 9% in after-hours trading on May 4, with COIN prices hitting $53.75. Shares in Coinbase have gained 60% since the beginning of the year but remain down 84% from their peak price of $343 in November 2021. COIN is currently down around 36% from its 2023 high of $84 on March 21 as regulatory pressure intensifies. By comparison, crypto markets have retreated just 7.5% from their 2023 peak in mid-April.