Coinbase reported user numbers that fell short of analysts’ estimates even as fourth-quarter earnings and revenue beat projections. The stock rose more than 2% in extended trading after dropping 4.8% during the day.

Here’s how the company did:

• Earnings: Loss of $2.46 per share, vs. loss of $2.55 per share as expected by analysts, according to Refinitiv.
• Revenue: $629 million, vs. $590 million as expected by analysts, according to Refinitiv.

Revenue plunged nearly 75% from a year earlier as the so-called crypto winter continued to drag on the price of cryptocurrencies. The company also reported a (non-adjusted) net loss of $557 million, a year after Coinbase generated net income of $840 million during the peak of crypto adoption.

Coinbase’s user base continues to shrink. The company said it had 8.3 million monthly transacting users (MTUs) during the fourth quarter, down from 8.5 million the prior period. Analysts were expecting 8.22 million, according to StreetAccount. Trading volume fell 9% to $145 billion from the previous quarter.

Transaction revenue fell 12% to $322 million from the previous quarter, which was below the $327 million consensus among analysts polled by StreetAccount.

For Q1 2023, the company projected subscription and services revenue of $300 million to $325 million, as well as restructuring expenses of about $150 million. Diversifying its revenue streams away from just trading fees has been a big priority for the company, with subscription and services taking center stage. Traction in products such as Staking, Earn, and Custody generated over $200 million in the fourth quarter.

Coinbase has gone through two major rounds of layoffs since June 2022 in an effort to pare back spending to preserve cash. The exchange cut 20% of its staff last month, following an 18% reduction of its workforce in 2022.

Prior to Tuesday’s after-hours moves, the stock was up more than 75% in 2023, following 2022’s plunge in crypto prices coupled with a retreat from the riskiest equities. This year bitcoin, the most popular cryptocurrency, has risen more than 48%.

Coinbase Chief Financial Officer Alesia told CNBC that markets have rebounded in the current quarter compared to Q4 2022, and that “market conditions have really evolved, even in a single month.” Haas noted that Coinbase generated $120 million in transaction fee revenue in January, adding that retail has come back to the market.

“We’re seeing what we’ve seen always in crypto,” Haas said in a call with CNBC. “It’s overall volatility and market conditions that drive trading activity and…these idiosyncratic events have changed that longer-term dynamic that we’ve seen.”

Coinbase’s business could also be impacted by possible SEC actions that would govern certain types of cryptocurrency tokens and crypto services as securities. Tweets by CEO Brian Armstrong and Chief Legal Officer Paul Grewal have suggested the company would fight any such action in court.

Crypto exchange Kraken, for example, recently ended its staking services as part of a settlement with the SEC over allegations that the platform sold unregistered securities.

Many centralized exchanges like Kraken and Gemini offer customers the option to stake their tokens in order to earn yield on their digital assets that would otherwise sit idle on the platform. With crypto staking, investors typically vault their crypto assets with a blockchain validator, which verifies the accuracy of transactions on the blockchain. Investors can receive additional crypto tokens as a reward for locking away those assets.

But on a call with CNBC, Haas insisted that Coinbase’s staking product was “not a security.” Haas added that staking was less than 3% of net revenue, so it was not a material source of net revenue at this time — but an “important part of the ecosystem” that the platform plans to grow.

Executives will discuss the results on a conference call starting at 5:30 p.m. ET.