When crypto exchange Coinbase went public in April 2021, it was a triumphant moment for the nascent crypto industry.
But the company endured a tough 2022, grappling with the cryptocurrency market crash, causing its stock price to plummet and forcing it to lay off hundreds of employees.
Those struggles continued on Tuesday, with Coinbase reporting a 63% drop in revenue in the second quarter, a loss of $1.1 billion from a year ago.
The company has blamed the cryptocurrency for a “furious” drop, saying revenue fell to $808 million from $2.2 billion a year earlier. Total monthly customers increased from 8.8 million last year to 9 million, but down from 9.2 million last quarter. Coinbase also predicted that user numbers will continue to decline over the next three months.
On Tuesday’s earnings call, Coinbase CEO Brian Armstrong emphasized the cyclical nature of cryptocurrencies, noting that the company survived previous recessions.
“It looks scary,” he said. “But it’s not as bad as it looks.”
The results demonstrate the tough challenges facing Coinbase during turbulent times in the cryptocurrency industry. Prices of major digital currencies crashed in his May and his June, collapsing a string of experimental cryptocurrency ventures and sending investors into financial ruin. The crash has resulted in layoffs across the industry, cooling the excitement that was building last fall when Bitcoin’s price hit a record high.
As part of the industry meltdown, Coinbase’s share price has fallen about 75% since November. The company’s success has a lot to do with the volatility of the broader crypto market. More than 80% of his revenue in the second quarter came from transaction fees he charges customers for buying and selling digital assets such as Bitcoin and Ether.
In June, Coinbase laid off 18% of its workforce, or about 1,100 employees. Armstrong said at the time that the company was “overhiring.”
Coinbase’s recent struggles have fueled concerns that it may be wasting its early industry lead as competitors such as Binance and FTX expand during recessions.
Despite its early start, Coinbase has never built a strong foothold in international markets and recently failed in its expansion efforts in India. The most high-profile product launch of 2018 — a marketplace for digital collectibles known as non-fungible tokens (NFTs) — drew little customer attention. And last year’s mass hiring saw the company’s expenses more than double his, leading to waste and bloat.
“Maybe growth has slowed in the last few years,” Mr. Armstrong said on a conference call.
Coinbase is also under regulatory scrutiny. Last month, the Justice Department sued a former Coinbase employee for insider trading. In a related lawsuit, the Securities and Exchange Commission said it believed some of the digital coins listed on Coinbase exchanges are securities and therefore subject to regulation such as stocks and bonds. rice field.
In a letter to shareholders on Tuesday, Coinbase said the SEC sent the company a “voluntary request for information” about its listing process in May. “It is not yet known if this inquiry will become a formal inquiry,” the letter said.
Coinbase’s competitors appear to be doing well during the recession. Financial results for his FTX, another cryptocurrency exchange, are “almost in line” with last year, said chief executive Sam Bankman-Fried. Binance, the world’s largest exchange announced In June, it aimed to fill 2,000 positions.
Still, Coinbase remains one of the most trusted and recognized cryptocurrency brands in the United States and is known for its Super Bowl commercial featuring a bouncing QR code. The company last week announced a partnership with BlackRock, the world’s largest asset manager, to help institutional investors trade bitcoin.