Coinbase Suffers $1.1 Billion Loss, But Won’t Stop Investing In Q3

Summary:
• Coinbase has reported a $1.1 billion loss in Q2. We discuss how it got there and what this could result into as the market attempts recovery.

Coinbase, one of the leading cryptocurrency exchanges has recorded a loss of $1.1 billion for the second quarter in 2022, after taxes. Additionally, Coinbase reported a 61% drop in revenue in the most recent quarter due to a drop in cryptocurrency prices and a decrease in trading volume. First-quarter losses due to a drop in cryptocurrency prices forced the company to cut 18% of its workforce in June. There were 9 million monthly transactional users in the quarter, down 2% from the previous quarter’s figure.

Tuesday’s normal trading session saw a nearly 11% drop in Coinbase’s stock following the company’s quarterly loss disclosure. Furthermore, the news will likely affect other cryptocurrency stocks as investors absorb the negative sentiment. However, the digital assets market has been showing signs of recovery, and this could limit the downtrend. Investors have regained some faith in Bitcoin after it stabilized at $23,000.

How it went south for Coinbase

In the second quarter, trading volume was down 30% compared to the first quarter. That resulted in a $647 million operating loss and a net cash position of $2.8 billion. Retail investment dropped by 68%, while institutional trading dropped by 46%. Furthermore, trade volumes on the exchange fell by more than half to $217 billion in Q2.

The Q2 loss is a significant loss, considering that Coinbase made $1.59 billion in net income in the same quarter last year. The company now anticipates between 7 million and 9 million monthly users. Three months ago, the company’s range was between 5 million and 15 million. In addition, Coinbase anticipates that the average transaction revenue per user will be in the low $20 range in the next quarter.

Coinbase has projected a significant decline in trade volumes for the upcoming quarter. Cryptocurrency and financial markets have been in turmoil since the bankruptcy of some projects and a wider selloff in the sector. Despite this, the corporation is confident that it will be able to maintain its investment strategy because of its $6.2 billion war chest.