Coinbase Reports 63% Drop in Revenue Amid Crypto Industry Crisis

When cryptocurrency exchange Coinbase went public in April 2021, it was a triumphant moment for the nascent crypto industry.

But the company endured a dismal 2022, battling a stock market crash that sent its stock price plummeting and forced it to lay off hundreds of employees.

< p class="css-at9mc1 evys1bk0">These struggles continued on Tuesday when Coinbase reported a 63% drop in second-quarter revenue and posted a loss of $1.1 billion from a year ago. year. The company said its revenue was $808 million, up from $2.2 billion a year earlier. Its total monthly customers rose to nine million from 8.8 million last year, but down from 9.2 million last quarter. Coinbase also predicted that its user count would continue to decline over the next three months.

In an earnings call on Tuesday, Brian Armstrong, chief executive of Coinbase, highlighted the cyclical nature of crypto and noted that the company has survived previous downturns.

"That sounds scary," he said. "But it's never as bad as it seems."

The results illustrate the tough challenges Coinbase faces at a turbulent time for the crypto industry. The prices of major digital currencies crashed in May and June as a series of experimental crypto firms collapsed, plunging investors into financial ruin. The crash prompted industry layoffs, dampening the excitement that surged last fall when the price of Bitcoin hit an all-time high.

In the Amid the industry meltdown, Coinbase's stock price has fallen about 75% since November. The company's success is largely tied to fluctuations in the broader crypto market. In the second quarter, more than 80% of its revenue came from trading fees charged to clients to buy and sell digital assets such as Bitcoin and Ether.

In June, Coinbase filed 18% of its staff, or about 1,100 employees. Mr Armstrong said at the time that the company had been "over-hiring". initial lead in the industry, as competitors like Binance and FTX grow during the recession.

Despite its early start, Coinbase never had a strong position in the international market, and it recently missed an expansion effort in India. Its highest-profile product launch of the year — a marketplace for digital collectibles known as non-fungible tokens, or NFTs — garnered little interest from customers. And a hiring spree last year led to overspending and bloat as company spending more than doubled.

"We probably would have may have grown more slowly over the past two years," Armstrong said on the call.

Coinbase has also been subject to regulatory scrutiny . Last month, the Justice Department filed insider trading charges against a former Coinbase employee. In a related action, the Securities and Exchange Commission said it considers some of the digital coins listed on Coinbase's exchange to be securities and therefore subject to regulation like stocks or bonds - a position to which the company objected.

In a letter to shareholders Tuesday, Coinbase said the S.E.C. sent the company a "voluntary request for information" in May about this registration process. "We do not yet know if this investigation will become a formal investigation," the letter says.

Coinbase's competitors seem to be doing better during the recession. FTX, another crypto exchange, had “similar” financial results to last year, according to its chief executive, Sam Bankman-Fried. Binance, the largest exchange in the world,