Citing “fast and furious” downturn of the crypto markets, Coinbase, one of the largest cryptocurrency exchanges in the world by exchange volume, posted a staggering $1.1 billion net loss in the second quarter of 2022, caused by a fall in trading volume and transaction revenue.
It’s the second consecutive quarter of losses for Coinbase and its largest loss since its listing on the Nasdaq Stock Exchange (NASDAQ) in April 2021. The results, which also missed analyst expectations, were shared in a Q2 2022 Shareholder Letter from Coinbase yesterday.
In the shareholder letter, Coinbase stated, “The current downturn came fast and furious, and we are seeing customer behaviour mirror that of past down markets.” Coinbase said that Q2 was a “tough quarter,” with trading volume falling 30% and transaction revenue down 35% sequentially.
On the fall of its trading volume and transaction revenue, Coinbase stated, “Both metrics were influenced by a shift in customer and market activity, driven by macroeconomic and crypto credit factors alike.”
What you should know
- The crypto exchange reported $802.6 million in revenue, which was a 45.1% drop from the preceding quarter and a staggering 60.50% drop compared to Q2 2021. Its net loss, which amounted to $1.1 billion, was mainly driven by $446 million in non-cash impairment charges caused by lower crypto asset prices in Q2.
- Recall that in order to cut expenses and improve profit margins, Coinbase cut 18% of employees in June, and has also taken a “pause, maintain and prioritize” approach toward product development. It reads, “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.”
- However, Coinbase wrote that despite the economic downfall, the company is doing its best to adjust to fluctuating market conditions. They have done so by prioritizing some of its products which include, Coinbase’s Retail App, Coinbase Prime, Staking, Coinbase Cloud and other Web3 applications.
- Despite the drop in transaction revenue, Morningstar equity analyst Michael Miller told Reuters in a report that while “Coinbase did not see a mass migration off its platform […], its users are becoming more passive in their cryptocurrency investing.”
- Miller however said noted that the “reduction is unlikely to restore profitability at current revenue generation levels.”
Looking ahead, Coinbase said it expects the “soft crypto market conditions” from the second quarter to continue into Q3 2022.
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The company said it expects a further fall in total trading volume and average transaction revenue per user, though it said it may see some revenue growth from subscription and service fees. Coinbase’s share price fell 10.55% on Tuesday following the release of its Q2 results and is priced at $87.68 at the time of writing.