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Coinbase Posts Quarterly Loss as Crypto Market Turmoil Hits Trading Volumes

Coinbase Global reported a larger-than-expected quarterly loss as investors worried by this year’s rout in risky assets shied away from trading in cryptocurrencies, sending its shares down 6 percent after the bell on Tuesday.

Trading volumes at the cryptocurrency exchange more than halved to $217 billion (roughly Rs. 17,25,130 crore) in the second quarter, with retail participation sinking 68 percent and institutional trading falling 46 percent.

Coinbase said it expects trading volumes to fall further in the current quarter, underscoring the turmoil brought to the sector by the collapse of certain cryptocurrency ventures and a broader selloff in financial markets.

That downturn has sent bellwether Bitcoin 50 percent lower in 2022, forced several companies including Coinbase to cut jobs and raised fears of a drop in interest from small traders.

Coinbase said its monthly transacting users fell 2 percent sequentially to 9 million in the April-June quarter.

“Coinbase did not see a mass migration off its platform during the quarter, but its users are becoming more passive in their cryptocurrency investing,” said Michael Miller, equity analyst at Morningstar Research.

That could be a material drag on Coinbase’s earnings as the company generates most of its revenue from trading fees, Miller added.

Adjusted loss was $4.76 (roughly Rs. 380) a share in the quarter, compared with the $2.65 (roughly Rs. 210) expected by analysts, according to Refinitiv data. Revenue fell 63 percent, missing market expectations.

Even though operating expenses surged 37 percent, the company lowered its annual expenses forecast for technology, development and administration to between $4 billion (roughly Rs. 31,800 crore) and $4.25 billion (roughly Rs. 33,780 crore), from $4.25 billion (roughly Rs. 33,780 crore) to $5.25 billion (roughly Rs. 41,730 crore).

“The reduction is unlikely to restore profitability at current revenue generation levels,” Miller said.

© Thomson Reuters 2022

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