Coinbase Reports $1 Billion Loss In Q2; Monthly Users Decline As Well

Cryptocurrency exchange Coinbase reported a loss of over $1 billion in the second quarter of 2022 as retail transaction revenue came in at $616.2 million, lower than what was expected by analysts.

According to a letter Coinbase shared with the shareholders, the U.S.-based crypto exchange has suffered a net loss of $1 billion in Q2 as compared to the net income of $1.59 billion in the same quarter last year.

A non-cash crypto-related impairment charge of around $377 million took the biggest toll on Coinbase's revenue, CNBC reported. The crypto stash of the firm was worth around $428 million by the end of June as compared to $1 billion by the end of March. Also, almost 40% of these assets were in Bitcoin (BTC), the world's biggest cryptocurrency.

"Q2 was a test of durability for crypto companies and a complex quarter overall," the company said. "Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program."

The crypto exchange's retail transaction revenue was at $616.2 million, down from the $667.1 million consensus among analysts polled by StreetAccount. Coinbase also reported a decline in monthly users during the period. It had nine million monthly users, a decline from from 9.2 million monthly users in the last quarter. However, the number is more than the 8.7 million StreetAccount consensus.

Coinbase said in the shareholders' letter that macroeconomic and cryptocurrency credit was the reason for lower trading volumes on the crypto exchange.

"While we did see net outflows in Q2, we observed that the majority of this behavior was institutional clients de-risking and selling crypto for fiat as opposed to withdrawing their crypto to another platform," it said. "As a result, our market share of the total crypto market capitalization declined to 9.9% from 11.2% in Q1."

In the light of similar events, ARK Investment Management founder and CEO Cathie Wood revealed that her firm sold around 1.41 million shares of Coinbase on July 26 due to "uncertainty" regarding crypto regulations and listings posed by the SEC's investigation of the exchange.

The exchange had earlier reported its first net loss as a public company of $430 million in Q1.