It is the crypto company’s largest quarterly net loss since its IPO on the Nasdaq Stock Exchange in April 2021.
Coinbase, the world’s largest cryptocurrency exchange, reported a shocking $1.1 billion financial loss in the second quarter of 2022 due to a “rapid and ferocious” decline in the cryptocurrency markets. Coinbase also observed a precipitous decline in trading volume and transaction income.
It is the second straight quarter of losses for the cryptocurrency corporation, and the worst loss since its Nasdaq debut in April 2021.
The results, which again fell short of analyst estimates, were disclosed in a Tuesday shareholder letter from Coinbase.
“The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets.”
Coinbase stated that Q2 was a “difficult quarter” due to a 30% decline in trading volume and a 35% decline in transaction income sequentially.
“Both measures were impacted by a change in customer and market behavior, which was influenced by both macroeconomic and crypto credit issues,” the report stated.
Despite the decline in transaction revenue, Morningstar stock analyst Michael Miller told Reuters in a report that “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, representing a 45.1% decline from the previous quarter and a stunning 153.1% decline from the prior-year quarter. Its $1.1 billion financial loss was mostly driven by $446 million in non-cash impairment charges caused by lower crypto asset values in the second quarter.
Despite the economic downturn, Coinbase said that the company is doing its best to adapt to altering market conditions.
To reduce costs and increase profit margins, Coinbase reduced its workforce by 18% in June and adopted a “stop, maintain, and prioritize” product development strategy.
“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.”
Prioritized products include the Coinbase Retail App, Coinbase Prime, Staking, Coinbase Cloud, and other Web3 applications.
Miller however remarked on the “reduction is unlikely to restore profitability at current revenue generation levels.”
Coinbase anticipates the “soft crypto market circumstances” of the second quarter to persist into the third quarter of 2022. The company anticipates a further decline in overall trading volume and average transaction revenue per user, but it anticipates a possible increase in subscription and service fee revenue.
Following the announcement of its Q2 earnings on Tuesday, the share price of Coinbase slid 10.55 percent to $87.68 at the time of writing.