Why Shares of Coinbase Are Rising Today

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What happened

Shares of the large cryptocurrency exchange Coinbase Global (COIN 3.65%) traded roughly 6% higher as of 11:43 a.m. ET today after reporting disappointing second-quarter results last night. However, the broader crypto market is enjoying a good day due to a better-than-expected inflation report.

So what

Coinbase reported a net loss of $4.98 per share on net revenue of $803 million in the second quarter, both numbers that missed analyst estimates. Trading volume on Coinbase fell to $217 billion, down from $462 billion in the second quarter of 2021. Assets on the platform also fell to $96 billion, down from $180 billion one year ago.

“Despite crypto market capitalization declining $1.3 trillion or ~60% in Q2, primarily driven by macroeconomic conditions and shocks to the crypto credit environment, we remain as bullish as ever on the future of this technology,” Coinbase executives said in a letter to shareholders.

The company added: “Coinbase is an all-weather company with experience in navigating through crypto asset price cycles. We continue to take a long-term view and remain focused on building for the future.”

Coinbase is now guiding for annual monthly transacting users (MTUs) to end the year between 7 million and 9 million, which would be a steep drop-off at the lower end of guidance, compared to 9 million MTUs at the end of Q2. Trading volume is also expected to fall again in Q3.

Now what

Although earnings and guidance came in weak, Coinbase’s stock is down more than 63% this year, and that’s after a 71% run higher over the last month.

The stock is benefiting today because new data this morning showed that inflation may have peaked in July, which would be good for cryptocurrencies and therefore Coinbase. At this point, I think the direction of the crypto market is more important for the company than its near-term quarterly results.

I expect the company and stock to move higher if and when crypto bounces back, which I also expect to happen at some point.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coinbase Global, Inc. The Motley Fool has a disclosure policy.

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