Coinbase Exchange Coinbase shares drop on billion-dollar loss in the second quarter and revenue miss


Coinbase share price dropped in extended trading on Tuesday after the Cryptocurrency Exchange reported a second-quarter loss of over $1 billion and missed consensus analysts estimates for revenue.


Here is how the company did:


  • Earnings per share:Negative $4.98 earnings per share, vs. loss of $2.65 per share as per analysts expectations, according to data provided by Refinitiv.
  • Revenue:$808.3 million, vs. consensus estimate of $832.2 million as expected by analysts, according to data provided by Refinitiv.


Coinbase Exchange is revenue declined nearly 64% y-o-y as investors exited the Cryptocurrency Market after last year’s dramatic run. Revenue from Retail transaction stood at $616.2 million, down 66% y-o-y and below the $667.1 million consensus estimate among analysts polled by Street Account.


Also Read: U.S. Charges Ex-Coinbase Manager In First Crypto Insider Trading Case


Coinbase Exchange reported a $1.1 billion quarterly net loss, compared with $1.59 billion in net profit in the same quarter last year, according to a letter released for shareholders. One factor behind the loss was a $377 million non-cash Cryptocurrency related impairment expense charge. Coinbase exchange is own Cryptocurrency Assets at the end of month ending 30th June were worth $428 million, down from about $1 billion at the end of March 2022. Over 40% of the exchange is Cryptocurrency Assets were in bitcoin.



“Second quarter was a test of durability for cryptocurrency companies and a complex quarter overall for us,” the company said in the letter. “Dramatic market movements and volatility shifted user behavior and trading volume, which negatively impacted transaction revenue, but also highlighted the strength of company’s risk management program.”


The exchange platform said that it had 9 million monthly transacting clients during the period, down from 9.2 million in the first quarter of 2022 but more than the 8.7 million Street Account consensus estimate. Macroeconomic factors and cryptocurrency credit resulted in lower trading volume during the second quarter, the company said.


Also Read: A Detailed Guide To The Coinbase Account Recovery


Coinbase Exchange is being forced to resize its operations in response to market conditions and negative sentiment around Cryptocurrency.


Cryptocurrency controversies helped to push down the prices in what some called a “Cryptocurrency Winter.” Coinbase Exchange is share price tumbled 75% during the second quarter, while the price of bitcoin plunged by about 59%. Coinbase Exchange said that it was extending its recruiting freeze into the foreseeable future and cutting 18% of the total employee headcount. Assets on the exchange platform fell quarter over quarter to $96 billion from $256 billion, mostly because of the constant burden on Cryptocurrency prices, Coinbase exchange said.


Also Read: Coinbase Exchange Faces SEC Investigation Over Its Crypto Listings


“While we did see net outflows in second quarter, we observed that the majority of this behavior was institutional clients de-risking and selling Cryptocurrency for fiat as opposed to withdrawing their cryptocurrency to another platform,” Coinbase Exchange said in the shareholder letter. “As a result of this, our market share of the total Cryptocurrency Market capitalization declined to 9.9% from 11.2% in Quarter 1.”


Bitcoin accounted for 31% of transaction revenue in the second quarter, the highest level since the first quarter of 2021, while 22% of transaction revenue was associated with Ethereum.


Coinbase Exchange updated its guidance for the full year 2022. It now expects 7 million to 9 million monthly transacting clients, down from a range of 5 million to 15 million in the first quarter. Management said it expects average transaction revenue per user (ARPU) in the low $20 range, rather than what was seen pre-2021 levels.


To reduce marketing expenses, the exchange platform is doing less with paid media and incentives, while pursuing different ways to attract nonpaid traffic. It also reduced its forecast for technology, development and general and administrative costs to $4 billion to $4.25 billion from the $4.25 billion to $5.25 billion range just a quarter ago. That includes optimizing infrastructure spending.


Also Read: How To Unlock A Restricted Coinbase Account?


“Of course, we do not control the macroeconomic factors or downturn,” CEO Brian Armstrong said on a conference call with analysts. “We do not really even control the Cryptocurrency Market more broadly, right? So, what do we control? Well, obviously we can focus on building great products for our clients. We can focus on staying on the forefront of Cryptocurrency Technology to make sure that we are creating compelling use cases to increase adoption and making those available to our clients. We can focus on our expense management in down markets, and, frankly, we can ensure that we just do not get sidetracked or disillusioned by short-term thinking.”


Brian Armstrong further added that he expects the exchange platform is current efforts to result in “disproportionate share in the next up cycle.”


Coinbase Exchange shares declined almost 11% in Tuesday is regular trading session.


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