Coinbase, one of the most popular digital currency exchange platforms, has announced a reported after-tax loss of $1.1bn and revenue downturn of 61% in its Q2 results.
Along with reports of crypto trading volumes declining over the past several months, Coinbase’s $446m loss was highlighted by the impairment charge of its ventures into various crypto investments.
A 5% drop in shares of the crypto platform occurred in the after-market trading which is on top of the 11% drop that happened earlier this week.
The latest results are a culmination of a difficult several months for Coinbase and the crypto market as a whole. The crypto exchange cut 18% of its staff last June as a new ‘crypto winter’ emerged, leading to valuations and prices of popular cryptocurrencies such as Bitcoin, Ethereum, and DOGE to fall dramatically.
Additionally, Coinbase was investigated by the Securities and Exchange Commission (SEC) over alleged claims of unregistered assets traded on the platform, which caused shares to drop 21%. Chief Legal Officer, Paul Grewal, vehemently denied the SEC claims stating: “Coinbase does not list securities. End of story.”
Trade volume was a critical factor as to Coinbase’s steep fall in revenue. Volume trading dropped 30% from first quarter results, suffering a $647m loss and a $400m net cash drop.
Rising interest rates have also contributed to a steep downturn for Coinbase due to a long-term debt taken out by the platform when interest rates were considerably lower. Its $6.2bn in capital was thought to maintain its stability before interests and taxes to not cross the $500m threshold.
Non-cash losses were of considerable interest from crypto insiders as they identified $1.52bn non-cash net losses in the first six months of the year, equivalent to 77% of its revenue.
Chief Financial Officer, Alesia Haas, addressed investor concerns on stock-based pay and stated that Coinbase took a long-term view of the costs due to the volatility of the current crypto market.
Despite the negative quarter results, Coinbase has recently agreed a deal with global asset manager BlackRock, which allows its customers to trade on Coinbase, which in turn, caused a short-term upturn in shares by 30%.