Shares in Coinbase Global Inc. dived in after-hours trading today after the cryptocurrency exchange reported weaker-than-expected third-quarter revenue.

For the quarter ended Sept. 30, Coinbase reported revenue of $1.234 billion, well up from $287 million in the same quarter of 2020 but down from $2.033 billion in the previous quarter. Profit in the quarter came in at $1.62 per share.

Analysts had been predicting revenue of $1.57 billion and a profit of $1.82 per share.

The results reflected a slowing in cryptocurrency investment over the summer, with Coinbase reporting that it has 7.4 million monthly transacting users in the quarter, up from 2.1 million year-over-year but down from 8.8 million in the previous quarter. Trading volume in the quarter came in at $327 billion, down from $462 billion in the prior quarter.

A similar downward trend in the number of people trading cryptocurrencies and volume was also reported by Robinhood Markets Inc. in its earnings on Oct. 26.

The positives for Coinbase’s key numbers included an increase of assets on the platform to $255 billion, up from $180 billion the previous quarter and $36 billion in the same quarter last year. Verified users increased to 73 million, up from 68 million in the previous quarter, suggesting that while trading volumes may have decreased, higher trading volumes are still possible.

“While we entered Q3 with softer crypto market conditions, driven by low volatility and declining crypto asset prices, market conditions improved meaningfully later in the quarter which we have continued to see into early Q4,” Coinbase said in a letter to shareholders. “This backdrop led to global crypto spot trading volumes declining 37% in Q3 as compared to Q2, however, Coinbase outperformed the market with total trading volumes of $327 billion, a 29% decline in the same period. We have consistently indicated that volatility is a key factor influencing our transaction revenue.”

Coinbase said total cryptocurrency market capitalization increased roughly 35% from the end of September and crypto asset volatility remained elevated. Retail monthly transacting users or MTUs were 11.7 million in October, while total trading volume came in at $186 billion.

Coinbase noted the volatility in markets is a positive as retail traders historically trade more during periods of heightened volatility. As a result, the company noted that its blended average retail fee rates had increased in October from the third quarter.

While not giving hard figures, Coinbase added that it believes that total retail MTUs and trading volume will be higher in the fourth quarter compared to the third quarter.

For the full year 2021, Coinbase said it expected between an average of 8 million and 8.5 million MTUs with modest growth through to the end of the year.

The miss on both revenue and earnings was noticed by investors and reflected in the company’s share price. Coinbase shares fell almost 13% after the bell.

Photo: Coinbase