Even lower than his forecast, Coinbase’s numbers for the second quarter of this year are in the red. With over 95 million verified users, the US cryptocurrency exchange has been a prime witness to the decline in popularity of digital assets as their price curves have inverted. Given its losses and the decreasing number of transactions, it is easier to understand how market participants, who were flooded with capital last year, are panicking today.
An important figure on cryptocurrencies today
Before discussing the disastrous situation in Coinbase, let’s talk about the evolution of the number of transactions on the platform by its users. This is a very relevant piece of information because it expresses both the decline in popularity of small investors for cryptocurrencies and the level of danger affecting trading platforms that are almost entirely dependent on the money-making activities of their users. So in the second trimester, Coinbase transactions down 52%. In a year (and even in just a few weeks compared to the first quarter), users have bought half as many cryptocurrencies.
Going public, Coinbase has consistently tried to reassure everyone that the company will find ways to protect itself from relying on user activity, and thus from rising cryptocurrency prices. We remember, at the time of the IPO, when the company confirmed this 96% of his income depended on his commissions on transactions. At the time, Coinbase admitted (without shouting too loudly) that “All of our revenue streams depend on crypto assets and the crypto economy in general. […] There is no guarantee that any supported crypto asset will retain its value or that there will be significant levels of trading activity.”
Coinbase Survival
In the second quarter, the platform’s losses exceeded $1 billion, with revenue of $808 million versus estimates of $832 million. The company’s revenue fell 64% year-over-year, an extreme decline for a company now accountable to Wall Street. Moreover, when the results were announced, Coinbase shares fell 5%. In order to cope with the crisis, 18% of the workforce was laid off, i.e. 1,100 positions.
Quite a lunar situation when you know that a few months earlier, when everything was going well in the cryptocurrency market, Coinbase spent more than 16 million dollars for advertising during the Super Bowl. At the time, Edward Snowden pointed the finger at the platform’s choice, criticizing Coinbase for not spending more to have a bug-free website and better customer service. Today, it is no longer these tools that are at stake, but the survival of Coinbase.
