Bitcoin price drop hits shares of Coinbase and other crypto exchanges

The bitcoin crash is hitting Coinbase hard.

The cryptocurrency exchange reported a first-quarter loss on Tuesday and revenue that was down 27% year-on-year, below Wall Street’s forecasts. Coinbase shares fell more than 25% on Wednesday (11) and reached an all-time low.

The broker’s shares are down more than 75% this year and are trading nearly 85% below their all-time high price in November. Stocks have lost more than half their value in the past week alone.

The drop in Coinbase shares coincides with the massive drop in the value of bitcoin, ethereum and other cryptocurrencies in recent months. Coinbase said in its earnings report that about 48% of its transaction revenue came from bitcoin and ethereum in the quarter.

Bitcoin prices dropped below $30,000 on Wednesday following the Consumer Price Index report on inflation.

As a result of the volatility, Coinbase reported sharp drops in the number of users, trading volume and assets starting in the fourth quarter.

“The first quarter of 2022 continued a trend of lower crypto prices and volatility that began in late 2021,” Coinbase said in a letter to shareholders. But the company added that Coinbase remains “as excited as ever about the future of cryptocurrency.”

Still, investors appeared to be alarmed by the new language in Coinbase’s quarterly earnings call to the Securities and Exchange Commission, which warned of bankruptcy risks.

The company said that “in the event of bankruptcy, the cryptographic assets we hold in custody on behalf of our customers may be subject to bankruptcy proceedings and those customers may be treated as our general unsecured creditors.”

This would imply that customers would not be able to access funds if Coinbase declared bankruptcy.

But Coinbase CEO Brian Armstrong has tried to reassure customers and clear up any confusion regarding the bankruptcy talk. In a series of tweets on Tuesday night, Armstrong wrote that “your funds are safe on Coinbase, just as they always have been” and added that “we have no bankruptcy risk.”

Armstrong wrote that the company was required to include bankruptcy notice language because of “a newly required disclosure for public companies that hold cryptographic assets for third parties” as a result of SEC rules.

Coinbase is arguably the most prominent cryptocurrency company. It generated a lot of attention earlier this year for a bizarre (but choppy) Super Bowl ad featuring nothing more than a QR code that moved across the screen for 60 seconds.

The brokerage said in its earnings report that the announcement “resulted in significant improvements in our brand recognition, favorability and consideration.”

Coinbase is also busy adding other cryptocurrencies to its platform, such as cardano. It also launched a market for non-fungible tokens (NFTs), digital assets that have become increasingly popular in the art and collectibles world.

None of this was enough to stop the massive drop in Coinbase stocks, however.

The company went public last year through a direct listing of its shares on Nasdaq and was immediately worth nearly $100 billion. Coinbase’s market cap is now around $15 billion.