Cryptocurrency exchange Coinbase cleared revenue views but missed earnings estimates for its Q2 report late Thursday. Coinbase stock retreated Friday as bitcoin fell after climbing in early trade. Elsewhere, MicroStrategy and bitcoin miner Marathon Digital also weakend.
Coinbase reported earnings of 14 cents per share, improving from a loss of 42 cents last year. Revenue spiked 104% over the year to $1.449 billion.
However, FactSet expected earnings of 95 cents per share. Still, Coinbase revenue beat estimates for $1.398 billion.
Crypto activity on the exchange saw a major boost as prices rebounded this year. Total trading volume increased 146% to $226 billion, which matched estimates. A bulk of that growth came from institutional customers. Institutional trading volume jumped 142% to $189 billion, ahead of expectations of $186.4 billion. Retail trading volume spiked 164% to $37 billion, just short of forecasts for $38.6 billion in volume.
Transaction revenue soared 138% to $780.9 million, driven by a 130% increase in consumer transaction revenue. However, the result missed predictions of 141% total transaction growth.
Subscription and services revenue grew to $599 million, while analysts expected $566 million. Custodial fee revenue rose to $34.5 million from $17 million for the same quarter in 2023. Analysts expected Coinbase to generate $39 million in custodial fee revenue. The exchange is serving as the custodian for a majority of the U.S. spot bitcoin ETFs that launched in January, as well as many of the spot ethereum ETFs that began trading on July 23.
Coinbase guided expectations for Q3 subscription and services revenue to between $530 million and $600 million, compared to $334 million last year. FactSet expects the exchange to generate $575 million in Q3 services revenue.
Bullish Drivers
"So much is happening in the bitcoin and crypto space it's hard not to be long-term bullish on Coinbase," Paul Marino, chief revenue officer at GraniteShares wrote in an earnings preview. ETF issuer GraniteShares is behind the 2x Leveraged Long Coinbase ETF.
He noted former President Donald Trump and Presidential candidate Robert F. Kennedy Jr. both advocated for stockpiling bitcoin at the annual bitcoin conference in Nashville last weekend. Trump also vowed to sack SEC Chair Gary Gensler if reelected.
"Outside of policy and regulation, the spot ether ETFs beginning to trade last week is another validation of blockchain and crypto as an asset class," Marino said. "This is just the beginning of the long-term build-out of cryptocurrencies with different characteristics, functions and utilities."
GraniteShares believes that the value of cryptocurrencies will grow as their blockchain use increases. "This will undoubtedly benefit Coinbase as it is the leading platform for trading bitcoin and cryptocurrency assets," Marino said. "They must show that they can monetize and build off the gains in BTC and crypto assets with a plan to broaden the platform."
Coinbase Stock
Coinbase stock fell 3.9% Friday. COIN stock climbed 1.8% in early trade. Shares retreated 5.2% during Thursday's regular session. The move put shares further below their 50-day moving average, after sliding to test that level on Monday.
Coinbase stock is consolidating with a 283.48 buy point. COIN shares rallied 17.6% this year.
Meanwhile, bitcoin dropped near $62,200 by Friday evening after rebounding as high as $65,537 in the morning. The cryptocurrency fell to July 14 lows early Thursday after the Federal Reserve indicated an interest-rate cut could be in play for September.
Still, bitcoin leapt about 48% in 2024.
Ethereum tumbled near $3,000 late Friday after peaking at $3,214 early in the day. That marks ethereum's lowest price since early July, prior to the spot ETF launch. Ethereum is up 31% in 2024.
Other Crypto-Related Earnings
Elsewhere, MicroStrategy reported a loss of $5.74 per share, compared to earnings of $1.52 per share last year. FactSet expected a loss of 93 cents. Total revenue fell 7% to $111.4 million, below analyst views of $122 million. MicroStrategy acquired 12,222 bitcoin since the start of Q2, bringing its total holdings to 266,500 bitcoins. The company has an average purchase price of $36,821 per bitcoin.
MSTR stock fell 4.2% Friday to erase its morning jump.
Marathon Digital reported a loss of 72 cents per share, well below expectations of a 16 cent loss. Revenue leapt 78% to $145.1 million, also below estimates of $157.9 million. The miner produced 2,058 bitcoin during the second quarter, falling 30% from the same period last year. Marathon Digital attributed the production decline to unexpected equipment failures at one of its sites, the April halving event, and an increase in the global hash rate. The hash rate represents the computational power required to mine bitcoin.
MARA stock carved 5.2% lower Friday.
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