Key Crypto Exchange Battles as Values Plunge
A beleaguered cryptocurrency exchange faces more turmoil in the wake of a plunge in currency valuations.
Coin base (COIN) shares have fallen 75% due to weak earnings and lower trading volume this year.
The company’s shares are extremely volatile as efforts to regain a foothold in the crypto industry remain unclear.
Shares closed negative 13 of the last 15 days starting on September 6. The stock rebounded slightly by 8.7% amid a broad market rally on 7 September.
Coinbase’s new problem
Now Coinbase is facing a new challenge as many investors have lost interest in owning or trading crypto like bitcoin or ethereum. The trend appeared in Coinbase’s lower earnings and trading volume during the second quarter.
Transactions fell as crypto valuations have now fallen below $1 trillion for the broader virtual currency market, while bitcoin traded below $19,000 before recovering somewhat on Wednesday.
Coinbase reported that second-quarter revenue fell 31% from last year to $803 million, while retail volume fell 38% to just $74 million. The group also posted a bigger-than-expected loss of $4.98 per share, compared with a profit of $3.45 per share in the same period in 2021.
Trading volumes fell 53% from last year to $217 billion, Coinbase said, blaming “behavior that reflects past bear markets.”
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A quarter of the company’s trading volume comes from bitcoin, the virtual currency whose value reached an all-time high of $67,802.30 in November 2021.
Coinbase addresses competitive challenges
Coinbase is facing several challenges as its main rival for the cryptocurrency platform, BinanceUS, will eliminate trading fees for daily bitcoin transactions
BinanceUS, an arm of the word’s largest digital currency exchange, allows investors to trade bitcoin, the largest cryptocurrency by valuation, against assets such as the US dollar, Tether and other dollar-backed stablecoins for free, eliminating the previous 0.1% fee on most transactions.
Coinbase recently launched a new partnership with BlackRock, the world’s largest asset manager, which gives its institutional clients access to Coinbase Prime.
Shares in Coinbase have suffered as a liquidity crisis has affected several large and prominent lenders such as Voyager Digital, Celsius Network, Babel Finance and BlockFi.
Retail investors are now wary of investing in crypto and some have closed their positions and are sitting on the sidelines. While some crypto investors may be coming back, others seem to have lost interest completely.
Some crypto investors lost their investments and don’t plan to return, Mike Boroughs, head of portfolio management at Fortis Digital, previously told TheStreet.
The demand for the digital currencies has largely disappeared while the supply has increased, he said.
Coinbase began efforts to reduce costs in June and has laid off 1,100 employees, or 18% of its workforce.
