Since Coinbase went public on the Nasdaq Stock Exchange in April 2021, this is its largest quarterly net loss.
The world’s largest cryptocurrency exchange, Coinbase, blamed a “fast and furious” decline in the cryptocurrency markets. It had a stunning $1.1 billion net loss in the second quarter of 2022, which also saw a decline in trading volume and transaction income.
The cryptocurrency company has lost money for the last two quarters in a row. This one marks the biggest loss since it went public on the Nasdaq in April 2021.
On August 9, Coinbase sent its shareholders a letter outlining its Q2 2022 financial results, which similarly fell short of analyst estimates.
“The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets.”
According to Coinbase, Q2 was a “difficult quarter,” with sequential declines in transaction revenue of 35% and trading volume of 30%.
“Both metrics were influenced by a shift in customer and market activity, driven by macroeconomic and crypto credit factors alike,” it wrote.
Morningstar equity analyst Michael Miller told Reuters in a report that despite the decline in transaction revenue, “Coinbase did not see a mass migration off its platform […], its users are becoming more passive in their cryptocurrency investing”.
The cryptocurrency exchange recorded revenue of $802.6 million, a startling 153.1 percent decline from the same quarter last year. The exchange also had a 45.1 percent decline from the previous quarter. Its $1.1 billion net loss was mostly the result of $446 million in non-cash impairment charges brought on by lower crypto asset values in Q2.
The cryptocurrency exchange noted that despite the recession, the business is working hard to adapt to shifting market conditions:
In June, Coinbase laid off 18% of its workforce in an effort to reduce costs and increase profit margins. Coinbase has also prioritized product development while pausing other projects.
“Overall, it will take some time to fully realize the financial impact of our actions, but we have lowered our full-year expense range for Technology & Development and General & Administrative expenses.”
The Coinbase Retail App, Coinbase Prime, Staking, Coinbase Cloud, and other Web3 applications are among the projects that are being given priority.
However, Miller remarked that it is “unlikely that the reduction will restore profitability at current levels of revenue generation.”
The “soft crypto market conditions” from the second quarter are anticipated to persist into Q3 2022, according to a statement from Coinbase. The business predicted a further decline in total trading volume and average transaction revenue per user. It also said that subscription and service fees might see some revenue rise.
Following the publication of its Q2 earnings on Tuesday, Coinbase’s share price dropped by 10.55 percent and is currently trading at $87.68.
