Coinbase, a cryptocurrency trading platform, lost half its value last week, including another recession due to the weather in the famously volatile crypto market, including the biggest one-day drop on Wednesday.
Coinbase reported first-quarter net loss of $ 430 million, or 9 1.98 per share, declining sales and for active users. Analysts had expected a gain of 8 cents per share. Revenue declined as trading volume declined, and active monthly users declined 19% from the fourth quarter.
It is unlikely that this result will surprise investors – shares of Coinbase Global Inc. fell 43% in the four days leading up to their earnings release on Tuesday. On Wednesday, the stock fell 26% to .7 53.72 per share. On the day of its initial public offering, just 13 months ago, the price touched $ 429 per share.
Patrick O’Shaughnessy, an analyst who covers Raymond James’ Coinbase, admitted in a note to clients that there was an ongoing debate over whether the crypto market was one of its common funk or whether it was deflating post-epidemic bubbles.
“While management firmly believes that the former will prove to be true, we suspect that the latter is more than a little true, especially since crypto has so far failed to serve as an inflation hedge in 2022,” O’Shaughnessy wrote.
Like many parts of Wall Street, O’Shaughnessy said his firm expects Coinbase to continue to lose money in the coming quarters and that “the difficulties of increasing crypto control on the street will certainly outweigh the disadvantages of professionals.”
Government officials have made it clear that regulations are coming. Treasury Secretary Janet Yellen said in April that the new industry needed more government oversight and that over the next six months, the Treasury would work with the White House and other agencies to develop reports and recommendations on digital currency.
“Our regulatory structures should be designed to support responsible innovation when managing risks – especially those that could disrupt the financial system and economy,” Yellen said.
On Tuesday, Yellen testified before the Senate Banking Committee, warning legislators about Stablecoin, a digital currency usually associated with a product such as the dollar or gold. Theoretically, stablecoins are more suitable for commercial transactions than other cryptocurrencies which can fluctuate in price. Stablecoins basically promise investors that they can be redeemed for a dollar. However, a recent run on Terra USD Stablecoin has dropped the price by as much as 30 cents, raising doubts among investors about the safety of Stablecoin. Terra recovered slightly on Wednesday, at about 68 cents.
“The outstanding stock of stablecoin is growing very fast and we really need a consistent federal structure,” Yellen told the committee, adding that legislation on stablecoin could be enacted by 2023.
President Joe Biden signed an executive order on digital assets in March, urging the Federal Reserve to look into whether the central bank should create its own digital currency. Biden’s order also directed federal agencies to study the effects of cryptocurrency on financial stability and national security.
In a letter to shareholders, Coinbase said it believes the current market situation is unsustainable and focuses on the long term while prioritizing product development.