© Provided by TheStreetThe cryptocurrency trading platform has been affected by the decline in interest in Bitcoin and other tokens.
Being a cryptocurrency investor or cryptocurrency exchange in 2022 is wrong.
The digital asset industry is going through one of its worst periods since the emergence of Bitcoin in January 2009.
According to data firm CoinGecko, the market has plummeted to $2 trillion from an all-time high of $3 trillion in November. Bitcoin (BTC), the most popular cryptocurrency, has lost more than 69% of its value since hitting a record high of $69,044.77 on November 10, 2021.
Hackers, meanwhile, have reached an all-time high, according to blockchain security firm Chainalysis, which has helped disrupt the mass adoption of cryptocurrencies.
A huge net loss
This is exacerbated by regulatory uncertainty in the US, where regulators still favor legislation through sanctions rather than creating a clear framework.
Coinbase ( COIN ) - Get Coinbase Global Inc. Report. One of the most prominent players in the industry confirmed all these woes that remain.
The platform posted disappointing results in the third quarter. Quarterly revenue was $576 million, down 53.4% year-on-year, the statement said. It should be noted that compared to the previous quarter, revenues decrease only every quarter. Coinbase had $803 million in revenue in the second quarter, down 31% from $1.2 billion in the first quarter.
The company confirmed another trend. has not earned any money since January. In the third quarter, Coinbase posted a net loss of $545 million, halved from the second quarter. This reduction in losses is due to the fact that in three months, the company managed to reduce costs by a sharp 38%.
In June, the company reduced 18% of jobs or released 1000 employees.
In the third quarter of 2021, the company generated a net profit of $406 million.
"The third quarter was a more difficult quarter," the company noted. Various macroeconomic factors, with consumer prices rising at their fastest rate in 40 years, the federal funds rate hitting a 14-year high, and geopolitical factors, particularly the Russia-Ukraine war, are weighing on global financial and crypto markets in 2022. "
"While cryptocurrency markets are not always correlated with macro conditions, this year we are seeing a correlation between broader risk appetite and crypto price action."
The company continued. “In addition to the decline in the average price of cryptocurrencies, they remained relatively low in the third quarter. As a result, cryptocurrency volatility, a key driver of our retail volume, hit a low point in the third quarter. Quarter 2020".
Coinbase's user base has plummeted since January. The company ended 2021 with growth of 11.2 million monthly active users (MTUs) in the fourth quarter. That number fell to 9.2 million MTU in the first quarter of 2022, 9 million MTU in the second quarter and 8.5 million MTU in the third quarter ending September 30. For the current quarter, Coinbase said it would be "slightly lower" at 9 million MTUs.
Retail investors haven't gone away
The decrease in the number of users is also reflected in the income. Trading revenue for retail investors fell to $346.1 million from $1.02 billion in the third quarter of 2021. Trade volume in the third quarter was $159 million, compared to $327 million in the same period last year.
Coinbase said it expects "lower transaction volumes and MTU numbers similar to the quarter's results" in the fourth quarter.
Coinbase shares are down 77% since January.
While Goldman Sachs analysts praised the group's desire to continue cutting costs, they remained concerned about sluggish trading volumes and the company's pessimism.
“We are cautious as the company has repeatedly stated its expectation that the business will operate with negative EBITDA unless there is a significant change in the market environment in the near term, which we believe is unlikely to be a good sentiment given the ongoing downturn. Cryptocurrency trading, according to a Goldman Sachs research note.
In addition, COIN's management discussed the regulatory uncertainty in the cryptocurrency ecosystem, which limits the company's ability to launch new products, and said the company is working to increase trading volume from retail to offshore trading platforms.
EBITDA stands for earnings before interest, taxes, depreciation and amortization, which helps investors gauge a company's financial health.
The platform said it would "operate within $500 million of our previously announced adjusted EBITDA loss buffer" unless market conditions worsen.
But Coinbase has identified a factor that could be very positive going forward.
Retail investors are not leaving. If they trade less, they keep their digital assets on the platform. "We see this on average as a sign that our clients are long-term believers in cryptocurrencies, and we believe they will become more active as market conditions improve."