Top cryptocurrency news: Coinbase posts $1.1 billion loss in Q2 on 'fast and furious' crypto downturn
Coinbase has highlighted a "rapid and furious" downturn in the crypto markets as the reason for a stunning $1.1 billion net loss in the second quarter of 2022, which also saw trading volume and transaction revenue plummet.
It is the crypto company's second straight quarter of loss and the highest loss since its debut on the Nasdaq Stock Exchange (Nasdaq) in April 2021.
The results, which again fell short of analyst estimates, were disclosed in Coinbase's Q2 2022 Shareholder Letter on August 9, which stated:
The current slump hit hard and quickly, and customer behavior is mirroring that of previous downturns.
According to Coinbase, the second quarter was a "difficult quarter," with trading volume plummeting 30% and transaction revenue falling 35% sequentially.
“Both metrics were affected by a shift in consumer and market activity, which was driven by both macroeconomic and crypto credit factors,” according to the report.
Despite the decrease in transaction revenue, Morningstar equities analyst Michael Miller told sources in a report that, while “Coinbase did not observe a mass migration away from its platform, its consumers are becoming more passive in their cryptocurrency trading.”
The cryptocurrency exchange recorded $802.6 million in revenue, a 45.1% decrease from the previous quarter and a startling 153.1% decrease from the prior-year quarter. Its net loss of $1.1 billion was primarily driven by $446 million in non-cash impairment charges resulting from lower crypto asset values in Q2.
Despite the economic downturn, Coinbase stated that the business is trying its best to react to altering market conditions:
In June, Coinbase laid off 18% of its workforce in an effort to reduce costs and increase profit margins. In addition, the company has prioritized product development and put it on "hold."
“Overall, it will take some time to fully realize the financial impact of our initiatives, but we have reduced our full-year spending estimate for Technology & Development and General & Administrative expenses.”
Miller, on the other hand, pointed out that the reduction is unlikely to restore profitability at present revenue-generating levels.
Looking ahead, Coinbase anticipates that the sluggish crypto market circumstances from the second quarter will persist into the third quarter of 2022. The company predicts additional declines in overall trading volume and average transaction income per user, however subscription and service fees may increase.
Coinbase's share price decreased 10.55% on Tuesday following the announcement of its Q2 earnings and is currently trading at $87.68.
