Cryptocurrency trading platform Coinbase (COIN) had a strong fourth quarter and fiscal year by any measure, but the depression in the crypto market has investors and even the company's C-suite searching for answers.
Coinbase's nearly 30% year to date decline has even outpaced the crypto markets nearly 20% drop over the same period.
Coinbase's stock seems tethered to the performance of cryptocurrencies and while the company's business is obviously tied into digital currencies, the higher ups at Coinbase say that the business is bigger than just the daily movement of bitcoin prices.
"We've also observed that our stock has been highly correlated with crypto prices, which are down roughly 20% year-to-date. We honestly don't truly understand this, as this correlation does not take into account the growth in our market share... the diversification of our business beyond investing, and let alone the future potential of our business as we expand into new assets and new product streams," Coinbase CFO Alesia Haas said.
But even while the company says its business is more than just crypto, Coinbase is still making big bets on digital currencies.
Coinbase Doubles Down on Crypto Holdings
Coinbase purchased another $350 million in cryptocurrencies over "the last few weeks," the company said during its earnings call this week.
That investment comes after the company, which is the largest U.S. crypto-assets exchange, bought over $500 million in crypto assets last August.
At the time, Coinbase said it would be investing 10% of all profits going forward in cryptocurrency with the plan for that percentage to keep growing over time as "the cryptoeconomy matures."
Investing heavily in the product that your peddling makes sense, but the downside of the investment is that the company's stock seems to become more tied to the performance of those digital currencies.
Coinbase had a great fourth quarter, quadrupling its earnings from the year ago period as crypto adoption reached all-time levels.
Coinbase's Fundamentals not Enough for Investors
Coinbase benefitted as bitcoin and ethereum hit all-time highs in 2021 with cryptocurrencies collectively hitting a $3 trillion market cap.
The company estimates that one-in-four U.S. households now own crypto as its monthly transacting users reached an all-time high of 11.4 million users, a 4 times year-over-year increase.
In 2021, trading volumes increased 8.5 times versus 2020.
Transaction revenue increased more than 6 times year-over-year to $6.8 billion, including $2.3 billion in the fourth quarter.
Despite those bullish numbers, there is uncertainty surrounding the crypto arena as oversaturation and economic uncertainty dampen some enthusiasm
But Coinbase is really bullish on its diversification apart from its core crypto exchange business.
"Our emerging revenue stream, which we call our subscription as a services revenues, became more significant. We generated more than $500 million of subscription and services revenues this year including $214 million in the fourth quarter," Haas said.
Coinbase says it is also excited to launch its NFT platform as it views non-fungible tokens as a very large addressable market that could help drive future growth.
Coinbase shares were down more than 2% at last check while bitcoin prices rose 3%.
