Coinbase Shares Drop As Crypto Exchange Reports $1.1 Billion Net Loss in Q2

The price of Coinbase (COIN) is dropping after the publicly-traded crypto exchange operator reports losses of over $1 billion in the second quarter of the year.

In its latest letter to shareholders, Coinbase says that from April to June 2022, the firm suffered a net loss of $1.1 billion, which includes $446 million in total non-cash impairment charges related to its crypto and ventures investments.

“Absent these non-cash impairment charges, net loss would have been $647 million. In Q2 [the second quarter], Adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] was negative $151 million.”

Coinbase reports a non-cash crypto-related impairment charge of $377 million as prices of digital assets nose-dive during the second quarter. The firm owns crypto assets, 40% of which is Bitcoin (BTC). Amid the downturn, the fair market value of the company’s crypto investments fell from about $1 billion in March to $428 million as of June 30th.

“Under GAAP accounting rules, we are required to record impairment charges on our crypto assets held when the price falls below its cost basis. We record these under Other operating expenses. Absent these non-cash impairment charges, our total Q2 operating expenses would have been $1.5 billion.”

Coinbase’s net revenue for Q2 also fell to $802.6 million from $1.16 billion in Q1. Its transaction revenue is down by 35% as the number of monthly transacting users drops from 92 million in Q1 to 9 million in Q2. The company says that institutional transaction revenue and retail transaction revenue fell by 17% and 36%, respectively, during this period.

The price of Coinbase shares fell after the issuance of the report from a high of $103.55 on August 8th, to a low of $85.60 on August 9th before it recovered on August 10th, when it closed at $94.14.

Despite its losses, Coinbase remains optimistic about its long-term outlook.

“We have long advocated that the best way to evaluate Coinbase through these early years of this nascent industry, is through the same lens we evaluate crypto — over a price cycle… We have conviction that if we continue to focus on building the right products and services, we will emerge stronger than before.”

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