Coinbase Global Inc.’s second-quarter results show a record loss of $1.1 billion. A lower-than-estimated revenue was caused by a digital asset price slumping that battered the US largest cryptocurrency exchange.
Coinbase shares dropped about 5% after the close of trading Tuesday. The company was listed in April 2021, and this year it has slumped 65% in what is known as “Crypto winter.”
As per Bloomberg News, the revenue declined to $808.3 million, down more than 60%. It missed the average analysts’ estimates of $854.8 million polled by Bloomberg. Users transacting monthly dropped by 2 % to 9 million in the second quarter, while the trading volume also missed estimates. However, Bitcoin’s trading volume rose from 24% to 31%. At the same time, the total assets in the Coinbase platform plunged to $96 billion, a drop of 63%.
In a letter to the shareholders, the company termed the current slide fast and furious. It added that the third quarter would also see soft cryptocurrency market conditions. Emilie Choi, Chief Operating Officer, said their core retail customers are sitting on the sidelines because of the downturn in the market.
Owen Lau, an analyst at Oppenheimer & Co, said that investors had expected a bad quarter because of poor trading revenue. The big theme in crypto winter has been diversifying to take stakes and interest income.
Revised Outlook
The company estimates the new outlook for the full year at 7 million to 9 million users, and this is lower than the earlier average monthly estimate of 8.7 million users. The loss in the second quarter ending June 30 included impairment charges related to ventures and investments amounting to $446 million. This amount is the largest since Coinbase became a public company.
The bankruptcy of crypto industry powerhouses such as Three Arrow Capitals and the collapse of the Terra-Luna ecosystem resulted in many popular crypto coins touching 18 month low in June.
Chief Financial Officer of Coinbase, Alesia Haas, said they acknowledged that market conditions are stressful in a conference call.
In May, Coinbase said that the Securities and Exchange Commission had requested voluntary information on the listing process. The company is unsure if this inquiry will become a formal investigation later. Bloomberg had earlier reported about Coinbase allowing unregistered securities for trading on its platform resulting in SEC scrutiny.
Choi said that the company had zero tolerance for front running, referring to the case of insider trading by a former Manager at Coinbase.
The bondholders of Coinbase are not receiving the results well. The 2028 maturity 3.375% bond dropped 1.375 cents to 70 cents on the dollar. Also, its convertible notes due to maturity in 2026 are down 2.25 cents to less than 70 cents. Both the bonds currently yield more than 10%.
