When the cryptocurrency trade Coinbase went public in April 2021, it was a triumphant second for the nascent crypto trade.
However the firm has endured a grim 2022, grappling with a crypto market crash that has tanked its inventory worth and compelled it to put off tons of of workers.
These struggles continued on Tuesday when Coinbase reported a 63 p.c decline in income within the second quarter and swung to a $1.1 billion loss from a yr in the past.
Blaming the “quick and livid” crypto downturn, the corporate mentioned income was $808 million, down from $2.2 billion a yr earlier. Its month-to-month buyer whole rose to 9 million from 8.8 million final yr, however was down from 9.2 million within the final quarter. Coinbase additionally predicted that its person numbers would proceed to fall over the following three months.
In an earnings name on Tuesday, Brian Armstrong, Coinbase’s chief government, emphasised the cyclical nature of crypto and identified that the corporate had survived earlier downturns.
“It appears scary,” he mentioned. “But it surely’s by no means as unhealthy because it appears.”
The outcomes illustrated the stark challenges dealing with Coinbase at a turbulent second for the crypto trade. The costs of the main digital currencies crashed in May and June as a collection of experimental crypto ventures collapsed, plunging traders into monetary wreck. The crash has led to layoffs throughout the trade, dampening the joy that surged final fall when the worth of Bitcoin reached a document excessive.
As a part of the trade meltdown, Coinbase’s inventory worth has fallen about 75 p.c since November. The corporate’s success is basically tied to the fluctuations of the broader crypto market. Within the second quarter, greater than 80 p.c of its income got here from buying and selling charges it charged prospects to purchase and promote digital property like Bitcoin and Ether.
In June, Coinbase laid off 18 p.c of its workers, or about 1,100 workers. Mr. Armstrong mentioned on the time that the corporate had “over-hired.”
Coinbase’s latest struggles have fueled issues that it may be squandering its early lead within the trade, as opponents like Binance and FTX develop in the course of the downturn.
Regardless of its early begin, Coinbase has by no means had a robust foothold within the worldwide market, and it lately botched an enlargement effort in India. Its most hyped product launch of the yr — a market for the digital collectibles generally known as nonfungible tokens, or NFTs — drew little buyer curiosity. And a hiring spree final yr led to overspending and bloat, as the corporate’s bills greater than doubled.
“We in all probability might have grown slower over the past couple of years,” Mr. Armstrong mentioned on the decision.
Coinbase has additionally come below regulatory scrutiny. Final month, the Justice Division filed insider-trading prices in opposition to a former Coinbase worker. In a associated motion, the Securities and Trade Fee mentioned that it thought of a few of the digital cash listed on Coinbase’s trade to be securities and, due to this fact, topic to regulation like shares or bonds — a stance the corporate has objected to.
In a letter to shareholders on Tuesday, Coinbase mentioned that the S.E.C. despatched the corporate a “voluntary request for data” in Could about that itemizing course of. “We don’t but know if this inquiry will change into a proper investigation,” the letter mentioned.
Coinbase’s opponents seem like faring higher in the course of the downturn. FTX, one other crypto trade, has had monetary outcomes which are “ballpark comparable” to final yr’s, in accordance with its chief government, Sam Bankman-Fried. Binance, the world’s largest trade, announced in June that it was trying to fill 2,000 positions.
Nonetheless, Coinbase stays one of the crucial trusted and acknowledged crypto manufacturers in the USA, identified for its Tremendous Bowl industrial that includes a bouncing QR code. Final week, the corporate introduced a partnership with BlackRock, the world’s largest asset supervisor, to assist institutional traders commerce Bitcoin.