Crypto exchange giant Coinbase has cited a “fast and furious” downturn in crypto markets as the reasons behind a staggering $1.1 billion net loss in the second quarter of 2022, which also saw trading volume and transaction revenue fall.
It is the second consecutive quarter of losses for the crypto company and the biggest loss since listing on the Nasdaq stock exchange (Nasdaq) in April 2021.
The results, which also missed analysts’ expectations, were shared in a Q2 2022 Shareholder Letter from Coinbase on Tuesday, which states:
“The current downturn came fast and furious, and we̵[ads1]7;re seeing customer behavior mirror that of previous downturns.”
Coinbase said Q2 was a “tough 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 by both macroeconomic and crypto credit factors,” it wrote.
Despite the drop in transaction revenue, Morningstar equity analyst Michael Miller told Reuters in a report that while “Coinbase did not see a mass migration from its platform. […]users become more passive in their cryptocurrency investment.”
The crypto exchange reported $802.6 million in revenue, which was a 45.1% drop from the previous quarter and a staggering 153.1% drop from the previous quarter. The net loss, which amounted to $1.1 billion, was mainly driven by $446 million in non-cash impairments caused by lower crypto asset prices in Q2.
However, Coinbase wrote that despite the economic downturn, the company is doing its best to adapt to fluctuating market conditions.
To cut expenses and improve profit margins, Coinbase cut 18% of staff in June, and has also taken a “pause, maintain and prioritize” approach to product development:
“Overall, it will take some time to fully realize the financial impact of our actions, but we have lowered the full-year spending range for technology and development and general and administrative expenses.”
Among these products being prioritized include Coinbase’s Retail App, Coinbase Prime, Staking, Coinbase Cloud and other Web3 applications.
However, Miller said, noting that “the reduction is unlikely to restore profitability at current revenue generation levels.”
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Looking ahead, Coinbase said it expects the “soft crypto market conditions” from the second quarter to continue into Q3 2022. The company said it expects a further drop in total trading volume and average transaction revenue per user, although it may see some revenue growth from subscription and service fees.
Coinbase’s stock price fell 10.55% on Tuesday following the release of its Q2 results and is priced at $87.68 at the time of writing.