Coinbase and MicroStrategy Earnings Differ

Coinbase and MicroStrategy saw varying performance last quarter despite investor interest in cryptocurrency.

Good News First for COIN

Coinbase reported substantial growth in profits for the second quarter despite a general downturn in cryptocurrency prices. Revenue increased significantly year-on-year (YOY) to $1.38 billion, up from $663 million. However, it declined sequentially from the prior quarter's $1.59 billion. The company's net profit also rose dramatically, from a loss of $97 million in the same period last year to a profit of $36 million. This was despite losses totalling $319 million from asset valuation changes within the company's cryptocurrency investment portfolio.

Shares in Coinbase initially rose following the earnings report but later fell during extended trading alongside a broader stock market decline. The approval of cryptocurrency exchange-traded funds (ETFs) drove increased trading volumes, with transaction revenue up 139% year-on-year. However, the repeat of SEC approvals of ETFs cannot be guaranteed, and price growth may also prove difficult without fresh record highs in Bitcoin, potentially weighing on COIN's future performance.

MSTR Heavy on Bitcoin

Last quarter, the lack of new highs in Bitcoin prices directly impacted MicroStrategy's bottom line, as the company remains committed to accumulating Bitcoin. The firm reported a 134% rise in losses to $280.8 million for the second quarter, though $180.1 million stemmed from "digital asset impairment" - in other words, the drop in Bitcoin's price. Notably, this was unrealized as the company did not sell any crypto holdings and purchased more during the "dip", ending with $14 billion in Bitcoin at quarter-end prices.

Despite issuing convertible notes to acquire more Bitcoin in June, MicroStrategy concluded its share price had gone too high. Following the quarterly announcement, the company enacted a 10-for-1 stock split effective the same day as reporting as revenues continued declining. In fact, in the second quarter, total revenues fell 7.4%, with the largest source of income from supporting previously sold products. Despite a 72.2% gross margin, the company still would have reported an income loss of over $100 million, separate from crypto assets.

External factors are potentially favourable for MicroStrategy: Analysts remain optimistic that Bitcoin prices may rise if the Federal Reserve cuts interest rates soon, which could finally bring the firm back from its losses.​

COIN in Consolidation

COIN has been trading between $190 and $285 over the past period, suggesting a triangle formation or just sideways price action. Holding the lower support at $190 could enable prices to advance beyond the recent high of $270, with intermediate resistance below $370 expected at $325. Conversely, a break below $190 may open the door to $150 and trigger a deeper pullback towards $120.​

Source: SpreadEx / Coinbase

Key Takeaways

Coinbase and MicroStrategy reported varying earnings last quarter despite continued investor interest in cryptocurrency. Coinbase saw substantial revenue and profit growth YOY, with revenue rising to $1.38 billion, despite declines in crypto prices impacting its portfolio. In contrast, MicroStrategy faced losses of $280.8 million primarily due to the drop in Bitcoin's price. It continued accumulating Bitcoin, but its business revenues fell.