Moody’s, a credit rating agency, expects US-based cryptocurrency exchange Coinbase to face serious financial problems in the coming months.
Moody’s downgraded Coinbase Corporate Family Rating (CFR). According to the agency, the decrease is due to a markedly reduced exchange income over the past few months, as well as a weakened potential for income growth due to a decrease in the value of crypto assets. The rating was also affected by the decreased activity of crypto exchange users. The Coinbase rating has now been placed under surveillance with the possibility of a further downgrade.
CFRs are long-term ratings that reflect the relative likelihood of an entity defaulting on its debt obligations. A downgrade could cause some Coinbase partnerships to end or scare away potential customers.
Moody’s noted that they expect the company’s profitability to decline further in the current market conditions. In May, the crypto exchange published a report reporting a quarterly loss of $430 million and a 19% decrease in the number of active users in a month.
Agency analysts said they will evaluate Coinbase’s ability to reduce its costs while maintaining effective operational controls, as well as changes in the regulation of cryptocurrencies amid their decline. Moody’s also intends to assess “the strength of the franchise and the company’s ability to retain talent.”
We will remind, earlier the CEO of Coinbase Brian Armstrong (Brian Armstrong) reported that the company reduced a significant part of its staff. 1,100 employees were fired, and Armstrong admitted that the company hired too many staff during the rise of the crypto markets.