What happened

Shares of Coinbase Global (COIN 4.27%) sank 8% on Wednesday after the digital-asset trading platform's third-quarter results fell short of investors' expectations.

So what 

Coinbase's net revenue decreased by 41% sequentially to $1.3 billion. That was below Wall Street's estimates, which had called for revenue of roughly $1.6 billion. 

The cryptocurrency exchange's monthly transacting users fell to 7.4 million, compared to 8.8 million in the second quarter. Its trading volume, in turn, declined by 29% to $327 billion. 

A finger pointing to a stock chart that rises sharply and then falls.

Coinbase's stock price fell sharply on Wednesday.

Chief financial officer Alesia Haas said during a conference call with analysts that a more tranquil trading environment weighed on Coinbase's results. "The story of our third quarter really centers on lower volatility that we saw early in the quarter," Haas said. "Our monthly transacting users and trading volumes and, therefore, transaction fee revenue, all correlate with volatility."

All told, Coinbase's net income plunged 75% to $406 million.

Now what

Coinbase's fortunes are largely dependent on the continued success of Bitcoin and Ethereum, the two most popular and valuable cryptocurrencies. Bitcoin accounted for 19% of Coinbase's trading volumes in the third quarter, while Ethereum represented 22%. Thus, the recent rally in Bitcoin's and Ethereum's prices to new all-time highs bodes well for Coinbase's fourth-quarter results.

Looking further ahead, Coinbase's fate is likely to correlate with cryptocurrency adoption trends.

"Coinbase is not a quarter-to-quarter investment, but rather a long-term investment in the growth of the cryptoeconomy and our ability to serve users through our products and services," the company said in a letter to shareholders. "We encourage our investors to take this point of view."