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The crypto company's most significant 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 decrease in trading volume and transaction income.
It is the second quarter of losses for the cryptocurrency corporation and the worst loss since its Nasdaq debut in April 2021. The results, which fell short of analyst estimates, were disclosed in a Tuesday shareholder letter from Coinbase.
"The present economic collapse came swiftly and ferociously, and customer behavior resembles previous bear 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 experience a mass exodus from its platform […], but its consumers are becoming less active in their bitcoin investments.”
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 mainly driven by $446 million in non-cash impairment charges triggered by lower crypto asset values in the second quarter.
Despite the economic downturn, Coinbase said that the firm is trying 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.
“It will take some time for the full financial effect of our initiatives to be realized, but we have cut our annual spending ranges for Technology & Development and General & Administrative expenses.”
Prioritized products include the Coinbase Retail App, Coinbase Prime, Staking, Coinbase Cloud, and other Web3 apps.
Miller, however, cautioned that “it is unlikely that the cut can restore profitability at the current level of revenue creation.”
Coinbase anticipates the “soft crypto market circumstances” of the second quarter to persist into the third quarter of 2022. The business anticipates a further decline in overall trading volume and average transaction income per user, but it expects 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.
