Coinbase (COIN) reported fourth-quarter earnings that beat analyst expectations and margins that are compressed, but "it's not necessarily anything that's unexpected" considering the current economic environment, Anthony Georgiades, co-founder of decentralized layer 1 blockchain Pastel Network, said Wednesday.
Nonetheless, “digital assets are certainly here to stay,” he said on CoinDesk TV’s “First Mover.”
On Tuesday, San Francisco-based Coinbase, the world’s second-largest cryptocurrency exchange by trading volume, reported fourth-quarter net revenue of $605 million, ahead of analyst estimates of $588 million, and up 5% from $590 million in the third quarter. Adjusted loss of $2.46 per share for the quarter also beat estimates for a loss of $2.52 a share but transaction volume fell 12% quarter over quarter to $322 million on lower overall trading volume.
During its earnings call, CEO Brian Armstrong cautioned retail investors “not to extrapolate those results forward,” pointing out that last year revealed just how fast the crypto market can change.
Investors are right to be wary, said Georgiades. Retail adoption today is “certainly up in the air” because crypto markets aren’t immune to the broader macro environment.
Coinbase has, in part, been able to capitalize on the bankruptcy of other crypto exchanges, he said. Because it is a U.S. publicly traded company, consumer and retail investors trust it. However, being a public company may also be one of its “largest intrinsic barriers” as it relates to regulation.
In the past few weeks, the U.S. Securities and Exchange Commission (SEC) has been cracking down on crypto companies. Earlier this month, the agency settled a $30 million fine with crypto exchange Kraken, ordering it to close its U.S. staking service. The agency separately said it plans to sue Paxos for allegedly selling an unregistered security token, Binance USD (BUSD).
Attempts to diversify Coinbase’s revenue may face headwinds. Georgiades said investors should be mindful of the three hyper-growth areas Coinbase provides – coin custody, stablecoins and staking products. Those areas “are all coming under significant regulatory scrutiny.”
Depending on what the regulators do and whether “Coinbase is looking to continue to drive hyper-growth across those new product lines,” the company may “need to reevaluate where it's domiciled as well,” he said.
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