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Got COIN? I Hope Not. Coinbase Plunges, Extends Loss After Hours

Coinbase (COIN) reported earnings tonight. It was a disaster. And I have a warning about using their platform.
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Coinbase Global 2022-05-10

Hoot of the Day 

There was stiff competition from President Biden on inflation, but I saved my Hoot of the Day award expecting a more solid performance somewhere. 

Coinbase says 

  • The future of money is here
  • Over 98 million people and businesses trust us to buy, sell, and manage crypto.
  • From Bitcoin to Dogecoin, we make it easy to buy and sell cryptocurrency. Protect your crypto with best in class cold storage.

10-Q 

Coinbase's latest 10-Q shows Coinbase lost $1.98 per share. Analysts expected a loss of $0.01 per share. 

Let's also take a peek at the Shareholder Letter.

Shareholder Letter 

Coinbase Metrics from Shareholder Letter

Coinbase Metrics from Shareholder Letter

What a Disaster  

My hoot of the day is Coinbase lost 2.2 million users yet bragged about advertising. 

Our first ever Super Bowl ad was successful in driving awareness of and promoting the Coinbase brand. Our Super Bowl ad “Less Talk, More Bitcoin” reached over 40 million U.S. households, had tens of millions of social mentions, and resulted in significant improvements in our brand awareness, favorability, and consideration, among our target audience.  

Derivatives 

In February, 4e acquired FairX, a regulated crypto derivatives exchange. Through this acquisition 4e plan to bring a range of crypto derivatives to market to Coinbase customers in the U.S.

Staking 

What can possibly be more exciting than derivatives on one of the most volatile of asset classes? 

But hold on, you can also pledge your Bitcoin to "staking" and receive "rewards" for doing so.

Rewards are calculated based on the amount of the cryptocurrency you hold in that particular wallet. Meaning, the more you hold of the cryptocurrency, the more Coinbase can stake on your behalf; and the more potential rewards you receive.

Who in their right mind wouldn't want to give Coinbase the right to stake their assets?

You can also earn rewards simply by buying and holding dollar-pegged stablecoins like Dai and USD Coin (USDC). And of course everyone knows stablecoins are very stable. 

If staking stablecoins isn't free money, what is? 

Coinbase Company Highlights 

Coinbase Company Highlights

To offer all these phenomenal services, Coinbase employs over 4,900.  

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Coinbase offers these amusing anecdotes on employee productivity. 

Our investment in our business now is especially critical – these periods of low volatility can provide the opportunity to focus more intently on product development (as opposed to peak periods, when we are more focused on meeting high demand). We approach the opportunities ahead with confidence and steady hands.  

Low volatility? 

Coinbase must mean low transactions, not volatility. Fortunately, they have steady hands. 

Coinbase (COIN) Weekly Chart 

Coinbase (Coin) weekly chart courtesy of StockCharts.Com

Coinbase (Coin) weekly chart courtesy of StockCharts.Com

With all this going for it, you might be wondering if Coinbase has done a moonshot. 

Alas, I am saddened to report that taking into consider after hours action, COIN is down 83%. 

Millennial Margin Call

What Happens in Bankruptcy?

I received that telepathic question moments ago, and it's a good one. (Actually Nick Winkler commented on it on Twitter). 

Let's tune into the 10-Q for the answer.

Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition. 

Winkler says that statement is a recent addition.

If you still have your coins on these exchanges after reading this, you are only nuts. 

Oh wait, I forgot about benefits of derivatives and ability to stake assets to Coinbase so they can do god only know what with them. 

Meet Alleged Stablecoin TerraUSD, Now in a Potential Death Spiral

In case you missed it please see my take on stablecoins.

Meet Alleged Stablecoin TerraUSD, Now in a Potential Death Spiral

I discuss stablecoins with a spotlight on TerraUSD, allegedly pegged to a US dollar.

This post originated at MishTalk.Com.

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