In its Q2 2022 Shareholder Letter, Coinbase reported a 63% decline in revenue and blamed the “fast and furious” nature of the crypto market downturn. The company said that its trading volumes and transaction revenue fell by 30% and 35% respectively. “Both metrics were influenced by a shift in customer and market activity, driven by macroeconomic and crypto credit factors alike”
Coinbase’s stock price has fallen about 75% since November. To cut expenses and improve profit margins, Coinbase laid off 18% of its staff, or about 1,100 employees in June.
Brian Armstrong, chief executive of Coinbase emphasized the cyclical nature of crypto and pointed out that the company had survived previous downturns by focusing on “great product execution during down markets and managing expenses closely”.
“It seems scary,” he said. “But it’s never as bad as it seems.”
He also noted that Coinbase is facing fiercer competition with Binance and FTX despite Coinbase’s early lead in the market. Sam Bankman-Fried, chief executive of FTX, stated in an email that the financial results had been “ballpark similar” to last years. Binance refused to reveal revenue figures but announced in June that it was hiring for 2000 open positions.
Coinbase is also facing regulatory scrutiny. The Securities and Exchanges Commission (SEC) considered whether Coinbase improperly let Americans trade digital assets that should have been registered as securities. Paul Grewal, Chief Legal Officer of Coinbase declared that “Coinbase does not list securities. End of story.” , and defended the platform’s due diligence process.
Even through the turmoil, Coinbase remains one of the most trusted and recognized crypto brands in the United States. Coinbase recently announced a deal with BlackRock to give clients of the asset manager seamless access to crypto via Aladdin. The services include “crypto trading, custody, prime brokerage and reporting capabilities”.