Leading crypto exchange Coinbase reported a larger than expected loss of $1.1 billion in the second quarter. The company blamed its woes on the downturn in the crypto market. While Coinbase is struggling to keep business afloat, trading volumes and transaction revenue across the exchange have also taken a hit in the last couple of months, culminating in more losses for the company.
The latest earnings report is the company’s second consecutive quarterly loss and the largest since it debuted on the Nasdaq Stock Exchange in 2021. In a Shareholder Letter sent to investors, Coinbase attributed its poor performance to the current downturn in the crypto market, stressing that the company has been here before and will surmount its current challenges.
Coinbase added that the second quarter was challenging, especially with trading volumes on the exchange drop by 30%. Similarly, the company’s revenue plummeted by 35%, resulting in significant losses. The company attributed the drop in trading volume and revenue to a shift in customer activity, something the company has also seen in previous down markets.
Analysts believe the drop in transaction revenue in Coinbase is not because of mass migration off the platform but because users are becoming more passive, which is understandable given the current realities in the market.
In its latest report, the company made $806.6 million in revenue, representing a 45.1% loss compared to the last quarter. The company is down by nearly 153.1% compared to the previous year’s quarter. While the company’s overall loss came in at $1.1 billion, most of the losses came from non-cash impairment charges amounting to $446 million.
Hope in sight
Despite reporting a larger than expected loss, Coinbase stated that it is taking action to adjust to fluctuating market conditions. In a bid to mitigate more losses and increase its profit margin, the company had to cut its workforce by 18% in June. Not just that, the company has also placed utmost priority on its product development approach.
While the company stated that it would take some time to see the financial impact of its actions, they are optimistic that the implemented moves will lower full-year expenses, especially for administrative costs, tech development, and more.