Crypto exchange giant Coinbase has cited a “fast and furious” downturn in crypto markets as the reason for a staggering $1.1 billion net loss in the second quarter of 2022, which also led to a slump in trading volume and transaction revenue.
It marks the second straight quarter of losses for the crypto company and its biggest loss since its listing on the Nasdaq Stock Exchange (Nasdaq) in April 2021.
The results, which also missed analysts’ expectations, were released Tuesday in a Coinbase Q2 2022 shareholder letter, which read:
“The current downturn has been rapid and severe and we are seeing customer behavior reflecting that of past declining markets.”
Coinbase said the second quarter was a “rough quarter,” with trading volume down 30% and transaction revenue down 35% sequentially.
“Both metrics were impacted by a shift in customer and market activity, driven equally by macroeconomic and crypto credit factors,” she wrote.
Despite the drop in transaction revenue, Morningstar equities analyst Michael Miller told Portal in a report that “Coinbase has not seen a mass migration from its platform […]its users are becoming more passive in their cryptocurrency investments.”
The crypto exchange reported $802.6 million in revenue, down 45.1% sequentially and a staggering 153.1% year-over-year decline. The $1.1 billion net loss was primarily due to $446 million of non-cash impairments caused by lower crypto asset prices in the second quarter.
However, Coinbase wrote that despite the economic downturn, the company is doing its best to adjust to the volatile market conditions.
To reduce expenses and improve profit margins, Coinbase shed 18% of its workforce in June and also adopted a “pause, keep and prioritize” approach to product development:
“Overall, it will take time for the full financial impact of our actions to be felt, but we have reduced our full-year technology and development expense range, as well as general and administrative expenses.”
Prioritized products include Coinbase’s Retail App, Coinbase Prime, Staking, Coinbase Cloud and other Web3 applications.
However, Miller said the “reduction is unlikely to restore profitability at current revenue generation levels.”
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Looking ahead, Coinbase expects “soft crypto market conditions” to persist from Q2 into Q3 2022. The company expects a further decline in total trading volume and average transaction revenue per user, although it could expect some revenue growth from subscription and service fees.
Coinbase’s share price fell 10.55% on Tuesday after the release of its second-quarter results and is trading at $87.68 at the time of writing.