Coinbase posts $747m loss as crypto winter hits trading volume
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Trading volume at the biggest US crypto exchange plunged 74 per cent to US$145 billion in the fourth quarter.
PHOTO: REUTERS
New York - Coinbase Global, the biggest US cryptocurrency exchange, posted a US$557 million (S$747 million) loss and saw revenue tumble 75 per cent in the fourth quarter of 2022 as trading volumes plunged amid a series of prominent industry bankruptcies and scandals.
The digital assets market suffered from dour sentiment over the past year, but the biggest blow to the sector came from the bankruptcy of Sam Bankman-Fried’s major crypto exchange FTX
“In the wake of FTX and other crypto company failures, we have seen increased regulatory scrutiny,” chief executive Brian Armstrong said on a call with analysts, but he added that the development will ultimately benefit Coinbase.
Amid the market downturn, trading volume at the crypto exchange plunged 74 per cent to US$145 billion in the fourth quarter, compared with US$547 billion a year earlier.
Retail traders also pulled back significantly, with their trading volume in the quarter plummeting nearly 89 per cent to US$20 billion.
One bright spot was subscription and services revenue, which rose about 33 per cent to US$282.8 million in the fourth quarter, benefiting from hefty interest rate hikes.
The loss was the fourth consecutive one for Coinbase, which has suffered from the wild fluctuations of crypto prices.
The firm cut 20 per cent of its staff in January, after laying off 18 per cent of its staff last June.
In an interview, chief financial officer Alesia Haas did not rule out more layoffs to improve financial results.
The company does not expect to meaningfully increase its headcount, which is anticipated to be about 3,650 people.
While Coinbase has seen a pickup in trading volume in recent weeks, as crypto prices rallied, it is facing mounting uncertainty.
Several of its newer businesses, such as stablecoin revenue and staking, in which users earn yields on coin deposits, may face regulatory scrutiny, after recent regulatory actions against rivals.
Coinbase suggested that it might consider legal action if regulators determine that a cryptocurrency on its platform is a security, according its annual report, which was released on Tuesday.
Mr Paul Grewal, chief legal officer of Coinbase, spoke of the challenges of registering crypto products with the United States Securities and Exchange Commission.
“Coinbase is quite open and eager to seek a path to registration where one is made available,” Mr Grewal said during the earnings call. “I think it’s fair to say that at this time the path to registration for products and services that may qualify as securities has not been open, or at least readily or easily open. So that’s proven to be challenging.”
It has also been losing market share, which dropped from 5.9 per cent in November to 4.1 per cent in February, according to CryptoCompare.
The world’s biggest crypto exchange, Binance, has gained share, reaching nearly 60 per cent in February, according to the researcher.
Coinbase’s shares have rallied by about 75 per cent so far in 2023 as a crypto price rally ramped up trading volumes.
The stock, which fluctuated after the release of fourth-quarter results, tumbled 85 per cent in 2022. BLOOMBERG, REUTERS
