When the cryptocurrency alternate Coinbase went public in April 2021, it was a triumphant second for the nascent crypto business.
However the firm has endured a grim 2022, grappling with a crypto market crash that has tanked its inventory value and compelled it to put off tons of of staff.
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 complete 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 govt, emphasised the cyclical nature of crypto and identified that the corporate had survived earlier downturns.
“It appears scary,” he mentioned. “Nevertheless it’s by no means as dangerous because it appears.”
The outcomes illustrated the stark challenges going through Coinbase at a turbulent second for the crypto business. The costs of the main digital currencies crashed in Might and June as a collection of experimental crypto ventures collapsed, plunging traders into monetary damage. The crash has led to layoffs throughout the business, dampening the joy that surged final fall when the worth of Bitcoin reached a report excessive.
As a part of the business meltdown, Coinbase’s inventory value has fallen about 75 p.c since November. The corporate’s success is essentially 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 clients to purchase and promote digital property like Bitcoin and Ether.
In June, Coinbase laid off 18 p.c of its employees, or about 1,100 staff. Mr. Armstrong mentioned on the time that the corporate had “over-hired.”
Coinbase’s latest struggles have fueled considerations that it might be squandering its early lead within the business, as opponents like Binance and FTX broaden through 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 often called 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 beneath regulatory scrutiny. Final month, the Justice Division filed insider-trading fees towards a former Coinbase worker. In a associated motion, the Securities and Trade Fee mentioned that it thought of among the digital cash listed on Coinbase’s alternate to be securities and, subsequently, 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 info” in Might about that itemizing course of. “We don’t but know if this inquiry will grow to be a proper investigation,” the letter mentioned.
Coinbase’s opponents seem like faring higher through the downturn. FTX, one other crypto alternate, has had monetary outcomes which are “ballpark related” to final yr’s, in keeping with its chief govt, Sam Bankman-Fried. Binance, the world’s largest alternate, 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 US, recognized for its Tremendous Bowl business 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.