11 May 2022 Jane Whitmoore
Coinbase Reports $430 Million Loss In Q1
Coinbase, the largest crypto exchange in the U.S. published its Q1 report, which shows trading volumes decrease with around 44% between January and March, as the exchange reported worse than expected earnings for the period.
Indeed, short-term traders felt the most pressure, as crypto markets moved in a tight range, which drove trading volumes down significantly. Furthermore, Coinbase makes 85% of its profit from transaction fees, which means that the decrease in volumes directly affected its profit for the period.
The revenue slump and Coinbase’s reaction
The report, published on May 10, reveals yet another detail – the company reported net losses of $430 million in just three months, which is far greater than the $47 million expected by Wall Street analysts. Furthermore, the revenues in Q1 fell 35% year on year to $1.16 billion, while analysts expected the revenues would be around $1.5 billion.
“We believe these market conditions are not permanent and we remain focused on the long term.” the company noted in its report, stressing that the slump was caused by falling crypto markets and increased volatility in 2022.
Figures like the monthly transacting users (MTU) have fallen to 9.2 million, which is nearly 20% lower than in Q4, 2021, with analysts expectations being close to 9.5 million. Furthermore, trading volumes on the platform fell from $547 billion in Q4 2021 to $309 billion for the first quarter of 2022, with three quarters of trades being institutional and just 24% retail transactions. Also, Coinbase witnessed an 8% asset decrease, as in Q1, funds on the platform were $256 billion, down from $278 billion at the end of Q4.
“The sequential decline was driven by lower crypto asset prices, partially offset by billions of dollars in net inflows,” Coinbase explained in its Q1 report.
Coinbase stocks plummet to an all-time low
The stocks of the crypto exchange made a deep dive and reached a historic bottom shortly after the report – first, Coinbase lost 13% of its price per share in the regular session, but added another 16% in after-hours trading on May 10.
The plummet left Coinbase’s shares at $61.55, according to MarketWatch, which is an 84% decrease from its all-time high of over $400 in April 2021.
Peter Brandt strikes against Coinbase
Interestingly, the report from Coinbase noted that the funds, if the exchange files for bankruptcy, may be used for paying out the proceedings.
“In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our clients could be subject to bankruptcy proceedings. Such customers would be treated as our general unsecured creditors,” an excerpt from the financial report read.
Veteran futures trader Peter Brandt immediately responded to the excerpt, calling the attention of Coinbase’s customers. He even urged Coinbase users to close their accounts and secure their crypto assets, which would further increase the problem for the exchange.
Coinbase CEO Brian Armstrong responded that the user funds are safe and the exchange is nowhere near bankruptcy.
“We believe our Prime and Custody customers have strong legal protections in their terms of service that protect their assets, even in a black swan event like this,” Armstrong said.
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