Bitcoin crash crushes Coinbase. Stock plunges again

The cryptocurrency brokerage reported a first-quarter loss on Tuesday evening and revenue down 27% from a year ago, missing Wall Street forecasts. Coinbase shares fell more than 25% on Wednesday and hit an all-time low.

Coinbase stock is now down more than 75% this year and is trading nearly 85% below its November all-time high. Shares have lost more than half their value in the past week alone.

The drop in Coinbase shares coincides with the massive drop in value of bitcoin, ethereum, and other cryptocurrencies over the past few months. Coinbase said in its earnings report that about 48% of its transaction revenue came from bitcoin and ethereum during the quarter.

Due to the volatility, Coinbase reported sharp declines in user count, trading volume, and assets starting in the fourth quarter.

“The first quarter of 2022 continued a trend of both declining crypto asset prices and volatility that began in late 2021,” Coinbase said in a letter to shareholders. But the company added that Coinbase remains “as excited as ever about the future of crypto.”
Still, investors seemed alarmed by new wording in Coinbase’s quarterly earnings filing with the Securities and Exchange Commission that warned of bankruptcy risks.

The company said that “in the event of bankruptcy, the crypto assets we hold on behalf of our customers could be subject to bankruptcy proceedings and those customers could be treated as our general unsecured creditors.”

This would imply that customers would not be able to access funds if Coinbase declared bankruptcy.

But Coinbase CEO Brian Armstrong tried to reassure customers and clear up any confusion over the bankruptcy talk. In a series of tweets Late Tuesday evening, Armstrong wrote that “your funds are safe at Coinbase, as they always have been” and added that “we have no risk of bankruptcy.”

Armstrong wrote that the company was required to include the bankruptcy warning language due to “a new disclosure requirement for public companies that hold crypto assets for third parties” due to SEC rules.

Coinbase is arguably the most prominent cryptocurrency company. He garnered a lot of attention earlier this year for a bizarre (but buzzy) Super Bowl commercial featuring nothing more than a QR code that moved across the screen for 60 seconds.

Coinbase said in its earnings report that the announcement “led to significant improvements in our brand awareness, preference and consideration.”

Coinbase has also been busy adding other cryptocurrencies to its platform, such as Cardano. And it also launched a market for non-fungible tokens (NFTs), digital assets that have become increasingly popular in the world of art and collectibles.

However, none of this was enough to stop the massive drop in Coinbase shares.

The company went public last year through a direct listing of its shares on the Nasdaq and was immediately worth nearly $100 billion. Coinbase’s market value now hovers around $15 billion.

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