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Is It Time To Buy Coinbase After Q2 Earnings?

It has been a rough start to public life for Coinbase after such a promising S-1, but could things be looking up after its Q2 earnings?

Back in April, when Coinbase (NASDAQ: COIN) closed its first day of trading with an $87 billion valuation, it was the seventh-largest new U.S. public listing of all time.  

Having fallen more than 21% since then amid wider crypto volatility, Coinbase’s Q2 earnings showed good volume but came with a stark warning. 

How did Coinbase do in Q2? 

As the largest cryptocurrency in the U.S., there was always going to be a lot of scrutiny on Coinbase for only its second-ever earnings report. That being said, it did pretty darn well: 

  • Revenue: $2.23 billion v.s. $1.78 billion expected.
  • Earnings: $3.45 per share adjusted, v.s. $2.33 expected.
  • Net profit: $1.6 billion — up 4,900% year-over-year (YoY) thanks to a massive increase in crypto interest and trading.
  • Monthly transaction users: 8.8 million, up 44% quarter-over-quarter (QoQ). 
  • Trading volume: $462 billion, up 38% QoQ. 

Big numbers come with big expectations though, and here’s where things get tricky for Coinbase. Putting a dampener on its Q2 win, the company warned that trading volume will be lower in the third quarter as more and more people drop out of the crypto game amid uncertainty. What’s more, cryptocurrency is as volatile as it gets. In 2021 alone, the crypto market as a whole regularly ascended to high peaks and dropped to low valleys, these daily swings rendering any sort of predictions or guidance moot. 

On the bright side though, Coinbase has begun to take measures to reduce this risk though by diversifying its crypto portfolio. Its Bitcoin exposure actually fell to approximately 24% of all trading volume in Q2, down from 29% in Q1. 

It’s still very early days for Coinbase, but Q2 showed some serious promise, despite the continued risks. Another couple of quarters like this and it could be a really interesting investment.

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