The current market downturn we’re facing has so far had its roots in the last quarter of the previous year. As far back as December 2021, coin prices have been dropping almost in line with the performance of several traditional stocks and indexes.
However, while the market maintains a bearish momentum, several top crypto companies were still able to hold off the market conditions and report earnings in the previous quarter.
Market Highs Lead To Strengthened Performances
In the later parts of February, Coinbase, the American crypto giant, announced its earnings for the fourth and final quarter of 29021. The earnings report showed that Coinbase generated $2.5 billion in total revenues - a jump from $585.1 million year-over-year. Top-line revenue growth led to big gains for Coinbase, attributing to a net income of $840.2 million in Q4 2021 - up from $176.8 million in Q4 2020.
Coinbase’s performance beat expectations significantly. The company was expected to report revenues of $1.94 billion for the quarter. Its earnings per share of $3.92 also beat expectations of $1.85. The company attributed most of its gains to the jump in the market at the start of the quarter - a period when Bitcoin and most other large-cap coins once again trended upwards and broke through their previous highs.
Another company that caught the eye of many investors is Block - the payment processor formerly known as Square. Block has done a great deal to embrace crypto as part of its business, and it only doubled down on that strategy after CEO Jack Dorsey stepped down from his position as Twitter CEO to lead the company full time.
Thanks to performances at the start of the previous quarter, Block was also able to beat Wall Street expectations. The company’s final quarterly earnings report showed that it earned earnings per share of $1.71 in the quarter - which beat estimates of $1.66. Block’s gross profit hit $1.18 billion for the quarter -a jump of 47 percent year-on-year and a much broader improvement over estimates of $1.16 billion.
Besides earnings, Block also toppled estimates for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The metric came in at a healthy $184 million, beating estimates of $143 million.
Tying Back To The Market Rally
As explained earlier, the big gains came primarily because of coin performances at the start of the quarter. Bitcoin hit its all-time high of $68,800 at the start of November after riding weeks of successive highs in October. During peak periods like these, crypto activity would have been soaring. Sadly, it all came crashing down in the middle of December as coins finally slowed down and entered into a lengthy bearish run that we’re still trying to get out of right now.
Coinbase already warned investors of possible dark times. Before the company opened its Q4 2021 earnings report, analysts had already expected that it would get up to $1.69 billion in revenues for the first quarter of 2022. Earnings per share estimates had also landed around $1.55.
However, the crypto exchange explained that its trading volume had been about $200 billion year-to-date. This will put Coinbase on pace to underperform the volumes done in previous quarters. The exchange added that its revenues from subscriptions and services had declined from the fourth quarter of 2021. All of this leads to believe that the company’s income and profit lines could also shrink this quarter.
Block has yet to indicate that it will see massive gains, although the company has also not shared a pessimistic outlook yet. In an earnings call with investors, company CFO Amrita Ahuja said:
“We believe Cash App’s year-over-year gross profit growth rate will improve in the second half of the year compared to the first half. As we look at 2022, we expect to sequentially grow gross profit each quarter across Cash App and Square throughout the year, assuming the macroeconomic environment remains stable.”
Ahuja’s statement shows that Block might already be feeling the heat of this quarter. Block might struggle to keep up with its previous performances with coin prices sliding and struggling to keep up. But for now, the company remains optimistic that things could look up in the second quarter of the year.