The largest cryptocurrency exchange in the United States said it was exhausting users, reflecting the continued destruction of the crypto market and investors’ concerns about risky assets.
Coinbase Global Inc.
COINS -12.60%
said Tuesday it lost hundreds of millions of dollars in the first quarter, leading to a drop in shares during non-business hours. After the aftermarket report, the stock traded at about $ 61.88 – well from $ 381 when the stock opened trading when it went public just over a year ago.
“Nasdaq is falling, bitcoin is falling. And this has led to less and less dollars being invested in the crypt, ”said Ales Haas, CFO of Coinbase. Ms. Haas said that while trading volumes were lower than expected, she believes Coinbase is strong in the future by investing in its future, including diversification into other products such as indispensable tokens or NFT.
Investors are increasingly thinking that financial markets are at a turning point, and as a result have retreated from some of the most speculative investments. The stock market fell from record highs when the Federal Reserve began to repeal its easy money policy, raising interest rates and expanding its asset portfolio. Last week, the central bank raised interest rates by half a percentage point, the biggest increase in two decades, leading to several days.
As high-risk assets, cryptocurrencies have fallen sharply. Bitcoin, which was declining for the sixth day in a row on Tuesday, has now fallen 54% from its November high. So far this year, it has lost one-third of its value, while Ethereum has fallen 37% in 2022. Sales of non-essential tokens declined.
“When [Coinbase] came out, it was one of the hottest growing stock, innovative companies, ”said Matthew Tuttle, CEO and Chief Investment Officer of Tuttle Capital Management. “As soon as the Fed turned in November, it was a death knell.” Mr Tuttle said he has no plans to buy cryptocurrencies or crypto-stocks any time soon.
Investors continued volatile trading on Tuesday with a turbulent session in the stock market. The Dow Jones Industrial Average ended the day down 0.3% after a trade-off between gains and losses, while the S&P 500 rose 0.2% and the Nasdaq Composite fell 1%. On Monday, all three indices fell 2% or more.
On Tuesday, Coinbase recorded a first-quarter loss of $ 429.7 million, or $ 1.98 per share, with revenue of $ 1.2 billion. That’s compared to earnings of $ 387.7 million, or $ 3.05 per share, with revenue of $ 1.8 billion a year earlier. Analysts had forecast a loss of 1 cent per share on revenue of $ 1.5 billion, according to FactSet.
Most of the exchange’s revenue falls on transaction fees, which declined significantly in the first three months of the year. The number of users of monthly transactions also declined, and Coinbase said in a letter to shareholders that it expects both the number of users and the volume of trades to decline again in the second quarter. Trading volumes from retail or individual investors more than halved compared to the previous quarter.
Dion Rabuen of the WSJ explains why Wall Street is now betting big on crypto and what it means for the new asset class and its future. Photocomposite: Elizabeth the Brave
Coinbase said its forecast for 2022 remains largely unchanged despite a bumpy first quarter. Shares, which fell 71% this year, fell 13% on Tuesday ahead of the company’s quarterly results.
Other cryptocurrencies have dropped significantly. Silvergate Capital Corp.
fell 42% this year, Marathon Digital Holdings Inc.
decreased by 64%, Riot Blockchain Inc.
decreased by 66% and TeraWulf Inc.,
bitcoin mining company down 80%.
The sharp decline in cryptocurrencies is not entirely unexpected. But many people in the cryptocurrency industry argue that this time will be different because of the expansion of the crypto market and the wider adoption of Wall Street. Several bitcoin bulls have praised its value as inflation hedging. It remains to be seen.
“For the most part, bitcoin is a non-profit asset at a time when real rates are rising. These are difficult conditions, ”said Steve Sosnik, chief strategist at Interactive Brokers. Mr. Sosnik notes that bitcoin is still trading about 300% higher than it was at the end of 2019.
The third-largest stablecoin, TerraUSD, which was supposed to keep the price at $ 1, fell 69 cents on Monday, sparking an influx of investors who sold their holdings. Finance Minister Janet Yellen on Tuesday reiterated calls to Congress to authorize the regulation of stablecoins following the fall in the price of TerraUSD.
This year’s defeat also punished high-capitalized technology stocks. Netflix Inc.,
Meta Platforms Inc. and Amazon.com Inc., which run Facebook, have fallen by at least 35% this year.
At the moment, investors are waiting for information about inflation, which will appear on Wednesday. If the report shows that inflation has peaked, analysts say it could potentially affect the Fed’s aggressive training plan.
Write Cory Dribusch at corrie.driebusch@wsj.com
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