May 19, 2022

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Coinbase stock continues to slide after earnings report

Coinbase stock continues to slide after earnings report

The largest US cryptocurrency exchange said it is bleeding users, reflecting the ongoing devastation in the cryptocurrency market and investor unease over risky assets.

Coinbase Global company

Currency -12.60%

On Tuesday, it said it lost hundreds of millions of dollars in the first quarter, dragging the stock down in post-closing trading. After the after-market report, the shares were trading at around $61 — a far cry from the $381 that the stock opened trading when it went public just over a year ago.

“Nasdaq is down, Bitcoin is down. This has put fewer and fewer dollars into the cryptocurrency,” said Alicia Haas, CFO of Coinbase. Although volumes were lower than expected, Ms. Haas said she believes Coinbase is in a strong position to move forward as it invests in its future, including diversifying into other products such as non-fungible tokens or NFTs.

Investors increasingly believe that the financial markets as well at a turning pointAs a result, it has pulled back on some of its most speculative investments. The stock market has fallen from record highs as the Federal Reserve begins to roll back its easy fiscal policies, raise interest rates and unwind its asset portfolio. central bank raise interest rates By half a percentage point last week, the biggest rise in more than two decades, causing a multi-day rout.

As a high-risk asset, cryptocurrencies have fallen dramatically. Bitcoin, which fell for the sixth day in a row on Tuesday, is down 54% from its November high. So far this year, it has lost a third of its value, while Ethereum has fallen by 37% in 2022. have flat.

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“when [Coinbase] “It came out, it was one of the active, growing, innovative companies,” said Matthew Tuttle, CEO and chief investment officer at Tuttle Capital Management. “Once the Fed pivoted in November, it was a death knell.” Mr. Tuttle said he has no plans to buy cryptocurrencies or crypto stocks in the near term.

Investors continued their volatility Trading on Tuesday A turbulent session in the stock market. The Dow Jones Industrial Average ended the day 0.3% lower after flipping between gains and losses, while the S&P 500 rose 0.2% and the Nasdaq Composite rose 1%. On Monday, all three indexes fell by 2% or more.

Coinbase, under the guidance of co-founder and CEO Brian Armstrong, on Tuesday posted a first-quarter loss of $429.7 million, or $1.98 per share, on revenue of $1.2 billion. That compares with earnings of $387.7 million, or $3.05 per share, on revenue of $1.8 billion a year earlier. Analysts expected a loss of 1 cent per share on revenue of $1.5 billion, according to FactSet.

The majority of the exchange’s revenue comes from transaction fees, which fell significantly in the first three months of the year. The number of monthly transacting users has also decreased, and Coinbase said in its shareholder letter that it expects user numbers and trading volume to decline again in the second quarter. Trading volumes from individual or individual investors decreased by more than half from the previous quarter.

WSJ’s Dion Rabouin examines cryptocurrency and its future. Composite photo: Elizabeth Smiloff

Coinbase said its forecast for 2022 remains largely unchanged despite a bumpy first quarter. The stock is down 71% so far this year, and is down 13% on Tuesday before the company’s quarterly results were announced.

Other crypto stocks have seen significant declines.

Silvergate Capital corp.

It’s down 42% so far this year,

Digital Holdings Marathon company

slithered 64%,

Blockchain riot company

has fallen 66% and

Tyrawolf company ,

Bitcoin miner, down 80%.

The sharp decline in cryptocurrency is not entirely unexpected. But many people in the cryptocurrency industry confirmed that this time will be different due to the expansion of the cryptocurrency market and its wider adoption by Wall Street. Many bitcoin bulls have praised its value as a hedge against inflation. That remained to be a sight.

“For the most part, bitcoin is an inexhaustible asset at a time when real prices are soaring. It’s a challenging environment,” said Steve Sosnick, chief strategist at Interactive Brokers. Mr. Sosnik notes that bitcoin trading is still about 300% higher than it used to be. at the end of 2019.

The third largest stablecoin, TerraUSD, which aims to maintain its value at $1, fell to 69 cents on Monday, causing investors to flock to sell their holdings. Treasury Secretary Janet Yellen on Tuesday Repeat calls Congress to authorize stable currency regulation after TerraUSD price drop.

“As things deteriorate and the market outlook becomes a little heavier, unfortunately the cryptocurrency will be one of the first assets to be dropped,” said Mike Boutros, chief strategist at DailyForex. Mr. Boutros said he believes the market could fall further and is not recommending investors to buy crypto assets.

This year’s defeat punished big-cap tech stocks, too.

Netflix company ,

Both Meta Platforms Inc. and Amazon.com, the parent company of Facebook, by at least 35% this year.

For now, investors are waiting for inflation data due on Wednesday. If the report indicates that inflation has peaked, analysts say it will likely affect the Federal Reserve’s aggressive plan to raise rates.

write to Corey Driebusch at corrie.driebusch@wsj.com

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