Coinbase’s second-quarter earnings results took a hit from the ongoing crypto market troubles as the cryptocurrency firm posted a quarterly loss that surpassed what analysts had been expecting. Following the report, Coinbase’s shares declined by 6 percent after Tuesday’s bell.
Many cryptocurrency companies are experiencing a downturn as investors are worried by how the market has turned out this year. Some of these companies have been forced to file for bankruptcy.
In the second quarter, Coinbase’s trading volumes declined more than 50 percent to $217 billion. Retail participation deopped 68 percent while institutional trading declined by 46 percent. The company revealed that for the third quarter it expects trading volumes to continue to fall as a result of the wide selloffs in financial markets and the collapse of some cryptocurrency ventures.
Bitcoin, the world’s largest cryptocurrency has declined more than 50 percent so far this year as a result of the downturn. Many crypto companies, including Coinbase, have been forced to cut down on their workforce as a way of coping with the new realities.
Coinbase also saw its monthly transacting users decline 2 percent sequentially to 9 million in the second quarter. According to Michael Miller, an equity analyst at Morningstar Research, “Coinbase did not see a mass migration off its platform during the quarter, but its users are becoming more passive in their cryptocurrency investing. That could be a material drag on Coinbase’s earnings as the company generates most of its revenue from trading fees.”
Coinbase reported an adjusted loss of $4.76 a share. Analysts had expected a loss of $2.65, according to Refinitiv data. Revenue declined 63 percent and failed to meet the expectations of analysts.
Operating expenses went up 37 percent in the second quarter. Coinbase lowered its annual expenses forecast for technology, development, and administration to between $4 billion and $4.25 billion, from $4.25 billion to $5.25 billion. “The reduction is unlikely to restore profitability at current revenue generation levels,” Michael Miller commented.