Coinbase posts $1.1B loss in Q2 on ‘fast and furious’ crypto downturn

Jamal Molla
Written By Jamal Molla
Jamal is an English teacher and freelance writer with a passion for NFTs, metaverse, crypto and technology.

Coinbase, the world’s leading cryptocurrency exchange, said it posts $1.1B loss in the second quarter of 2022. The company made this disclosure after citing a “fast and furious” posture of the global market as the major reason for the huge loss in Q2. Coinbase posts $1.1B loss in Q2 of 2022, a quarter which also saw a sharp decline of crypto transaction revenue and trading volume.

According to Coinbase, the loss of $1.1B in Q2 is the largest loss since its listing in April 2021 on the Nasdaq Stock Exchange (Nasdaq). On Tuesday, August 9, Coinbase shared a Q2 2022 Shareholder Letter to members of the public, stating the reasons for the loss. The letter missed analyst expectations for 2022.

The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets. Q2 was a “tough quarter” with trading volume falling 30% and transaction revenue down 35% sequentially. Both metrics were influenced by a shift in customer and market activity, driven by macroeconomic and crypto credit factors alike,” the letter stated.

According to Michael Miller, Morningstar’s equity analyst, in a response to Reuters’ query, “despite the bearish outlook of the cryptocurrency market, Coinbase didn’t face user migration, rather its users became more passive in their investment. Reduction is unlikely to restore profitability at current revenue generation levels”.

The global crypto market recorded a loss of $802.6 million in revenue, a figure which is lower than that of the preceding quarter. The market’s net loss amounted to $1.1 billion, a situation which experts say was due to lower crypto asset prices in Q2, even as crypto fundraising hits $30.3B in H1, exceeding 2021 record.

In the Q2 2022 Shareholder Letter, Coinbase noted that the company is doing everything within its powers to stay afloat until a time when the crypto market rebound. In order to improve profit margins and cut down expenses, the company announced in June that it’s shedding its employees’ strength by 18%. The company also maintained that it plans to take a “pause, maintain and prioritize” approach toward product development.

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,” the letter noted.

Among other things, the products being prioritized by Coinbase include Coinbase Cloud, Staking, Coinbase Prime, Coinbase’s Retail App, as well as other Web3 applications.

In the coming months, Coinbase said it expects the performance of Q2 to run into the third quarter. The company maintained that experiencing a market rebounce is not magic and that it predicts a further fall in average transaction revenue and total trading volume. The company, however, said there may be some improvements in subscription and service fees.

Following the release of its Q2 results on Tuesday, the company’s share price fell by 10.55%. At press time, Coinbase shares trades at $87.68.

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