Coinbase (NASDAQ:COIN), a prominent cryptocurrency exchange, exceeded expectations for its third-quarter revenue; however, the company faced a decline in trading volumes for the second consecutive quarter, leading to a drop in its shares during after-hours trading.
During the third quarter, trading volumes at Coinbase reached $11 billion, a significant decrease from the $26 billion recorded in the same period the previous year, mirroring a similar decline observed in the preceding quarter that ended on June 30.
Despite the decline in trading volumes, Coinbase reported total revenue of $674.1 million for the three months ending on September 30, surpassing analysts’ estimates of $653.19 million, according to data from LSEG.
Investors appeared cautious, causing shares of the crypto exchange to fall more than 5% in extended trading, primarily due to concerns about the diminishing trading volumes.
Throughout this year, investor sentiment toward cryptocurrencies has remained lukewarm, following a series of high-profile collapses in 2022 that led to substantial outflows of more than a trillion dollars from the cryptocurrency sector.
The declining trading volumes coincide with Coinbase’s ongoing battle with the U.S. Securities and Exchange Commission (SEC), which sued both Coinbase and its rival, Binance, in June. The SEC alleged that Coinbase traded at least 13 crypto assets that qualify as securities without registering them with the regulatory body. Both exchanges have denied these allegations.
During its previous earnings call, Coinbase’s Chief Legal Officer, Paul Grewal, expressed confidence in Coinbase prevailing in the case.
In its shareholder letter, Coinbase mentioned that it generated approximately $105 million in total transaction revenue in October, thanks to a rebound in the price of bitcoin, the world’s largest cryptocurrency. However, the company cautioned against drawing broad conclusions from these results.
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