Coinbase has bigger-than-expected quarterly loss as trading volume drops

Coinbase Global posted a larger-than-expected quarterly loss as a sell-off in risky assets this year drove investors away from cryptocurrency businesses.

The company’s shares, which had fallen sharply in the premarket, rose about 0.8% in early trades in New York, in an overall positive session on Wall Street.

Cryptocurrency trading volume more than halved to $217 billion in the second quarter from a year earlier, with retail down 68% and institutional by 46%.

Coinbase said it expects trading volumes to drop further in the current quarter, underscoring the turmoil brought to the industry by the collapse of certain cryptocurrency companies and a widespread sell-off in financial markets.

That turn in the markets sent bitcoin down 50% in 2022, forced several companies, including Coinbase, to carry out layoffs and raised fears of a waning interest from smaller investors in the sector.

Coinbase said users with monthly transactions dropped 2% on a sequential basis to 9 million in the April-June quarter.

“Coinbase did not see a mass migration of its platform during the quarter, but its users are becoming more passive in their cryptocurrency investments,” said Michael Miller, equity analyst at Morningstar Research.

This could be a material drag on Coinbase’s results, as the company generates most of its revenue from trading fees, Miller added.

The adjusted loss was $4.76 a share for the quarter, compared with the $2.65 expected by analysts, according to data compiled by Refinitiv. Revenue fell 63% and was below market expectations.

While operating expenses increased by 37%, Coinbase lowered its annual technology, development and administration expenditure forecast to between $4 billion and $4.25 billion, from $4.25 billion to $5.25 billion. billion earlier.

“Reducing expenses is unlikely to restore profitability to current levels of revenue generation,” Miller said.