Cryptocurrencies, the crisis continues: Coinbase loses 1.1 billion

Suffering the main US exchange platform with transactions that gradually reduce in number and value. The company revises the outlook downwards and announces an 18% cut in staff

10 Aug 2022

Domenico Aliperto

In the wake of the collapse of cryptocurrencies, Coinbase, the leading US platform for exchanging virtual currency, recorded a loss of $1.1 billion in the second quarter of 2022. To understand the extent of the damage, just think that in the same quarter of last year the company had scored 1.59 billion in net profit. The group's revenue fell nearly 64%, while retail transaction revenues were $616.2 million, down 66% and below the consensus of $667.1 million among analysts surveyed by StreetAccount. Revenue fell to $808 million from $2.2 billion in the second quarter of 2021. Data that have led to a loss of 5% of the stock on the stock exchange, and that are precisely to be attributed mainly to the crisis that since last November has been affecting the cryptocurrency sector in its entirety.

Index of topics

•             The market grappling with the winter of cryptocurrencies

•Coinbase's short-term                strategies

The market grappling with the winter of cryptocurrencies

Cryptocurrency controversies have helped drive prices down in what some observers have called a "cryptocurrency winter." Coinbase shares  tumbled 75% during the second quarter, while the price of bitcoin fell about 59%. The first of the cryptocurrencies currently stands at 23,246 euros, down 3.87% in the last 24 hours. Ethereum also  recorded a negative performance, leaving 5.61% on the ground and settling at a value of 1,702 euros. No wonder other exchange platforms, such as Celsius Network and Voyager Digital Holdings, have already declared bankruptcy.

"The second quarter was a durability test for cryptocurrency companies and a complex quarter overall," the company said in a letter to investors. "Dramatic market movements have shifted user behavior and trading volume, which has affected transaction revenues, but has also highlighted the strength of our risk management program."

The company explained that it counted 9 million monthly active users during the period, down from 9.2 million in the first quarter, but more than the 8.7 million expected by StreetAccount.

Coinbase's strategies for the short term

In the near future Coinbase will not only maintain the hiring freeze, but will also cut 18% of the staff. Assets on the platform declined quarter-over-quarter from $256 billion to $96 billion, mainly due to pressure on cryptocurrency prices, Coinbase said.

"Although we saw net outflows in the second quarter, we observed that most of this behavior involved institutional clients reducing risk and selling cryptocurrencies for fiat instead of withdrawing their cryptocurrencies on another platform," Coinbase added  in the letter to shareholders. "As a result, our market share on the total market capitalization of cryptocurrencies fell to 9.9% from 11.2% in the first quarter."

The company has updated its outlook for the full year. It now predicts 7 million to 9 million users making monthly transactions, down from a range of 5 million to 15 million three months ago. Management said it expects average transaction revenue per user at the low end of $20.

"Of course, we don't control macroeconomic factors or downturn," CEO Brian Armstrong commented in a conference call with analysts reported by CNBC. So what do we control? Well, of course we can focus on creating great products for our customers. We can focus on staying at the forefront of cryptographic technology to make sure we create compelling use cases and make them available to our customers. We can focus on our expense management in bear markets and, frankly, we can make sure we are not distracted or disillusioned with short-term thinking."