The largest cryptocurrency exchange in the United States said it discouraged consumers, reflecting the continuing destruction of the crypto market and investors’ concerns about risky assets.
Coinbase Global Inc. COIN -12.60% said on Tuesday that it lost hundreds of millions of dollars in the first quarter, causing shares to fall in after-hours trading. According to the aftermarket, the stock traded at about $ 61 – far from $ 381 when the stock went trading, when it went public a little over a year ago.
“Nasdaq has fallen, bitcoin has fallen. And that has led to fewer and fewer dollars being invested in cryptocurrencies, “said Alessia Haas, Coinbase’s chief financial officer. Ms Haas said that although trading volumes were lower than expected, she believed Coinbase was in a strong position ahead as it invested in its future, including diversification into other products such as irreplaceable tokens or NFT.
Investors increasingly believe that financial markets are at a turning point and as a result have withdrawn from some of the most speculative investments. The stock market fell from record highs when the Federal Reserve began to repeal its easy money policies, raising interest rates and dissolving its asset portfolio. The central bank raised interest rates by half a percentage point last week, the biggest increase in more than two decades, leading to several days of decline.
As high-risk assets, cryptocurrencies have fallen dramatically. Bitcoin, which fell for the sixth day in a row on Tuesday, is now down 54% from its highest level in November. So far this year, it has lost a third of its value, while Ethereum has fallen by 37% in 2022. Sales of non-essential tokens have fallen.
“When [Coinbase] It turned out to be one of the hottest growing stocks, innovative companies, “said Matthew Tuttle, CEO and Chief Investment Officer at Tuttle Capital Management. “As soon as the Fed turned around in November, it was a death knell.” Mr Tuttle said he had no plans to buy cryptocurrencies or cryptocurrencies in the near future.
Investors continued their volatile trading on Tuesday with a stormy session in the stock market. The Dow Jones Industrial Average ended the day down 0.3% after a profit-loss shift, while the S&P 500 rose 0.2% and the Nasdaq Composite rose 1%. On Monday, all three indices fell 2% or more.
Coinbase, led by co-founder and CEO Brian Armstrong, reported a first-quarter loss of $ 429.7 million, or $ 1.98 per share, on $ 1.2 billion in revenue on Tuesday. That’s compared to earnings of $ 387.7 million, or $ 3.05 per share, up from $ 1.8 billion in revenue a year earlier. Analysts forecast a loss of 1 cent per share on revenue of $ 1.5 billion, according to FactSet.
Most of the exchange’s revenue comes from transaction fees, which fell sharply in the first three months of the year. The number of users of monthly transactions also decreased, and Coinbase said in a letter to the shareholder that it expects both the number of users and the volume of trade to decrease again in the second quarter. Retail trade volumes from retail or individual investors fell by more than half compared to the previous quarter.
WSJ’s Dion Rabuin examines crypto and its future. Photocomposite: Elizabeth Smelov
Coinbase said its outlook for 2022 remains largely unchanged despite the bumpy first quarter. Shares, which have fallen 71% so far this year, fell 13% on Tuesday ahead of the company’s quarterly results.
Other cryptocurrencies declined sharply. Silvergate Capital Corp. fell 42% so far this year, Marathon Digital Holdings Inc. down 64%, Riot Blockchain Inc. fell 66 percent, and TeraWulf Inc., a bitcoin mining company, fell 80 percent.
The sharp decline in cryptocurrencies is not entirely unexpected. But many in the cryptocurrency industry say it will be different this time because of the expanding crypto market and its wider acceptance by Wall Street. Several bitcoin bulls praised its value as a hedge of inflation. This remains to be seen.
“For the most part, bitcoin is an intractable asset at a time when real interest rates are rising. This is a difficult environment, “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 stable coin, TerraUSD, which had to keep its value at $ 1, fell to 69 cents on Monday, causing an influx of investors to sell their assets. Finance Minister Janet Yellen reiterated her calls to Congress to allow the regulation of stablecoins after the fall in the price of TerraUSD.
“As things get worse and market prospects get a little tighter, crypto will unfortunately be one of the first assets to fall,” said Mike Boutros, a strategist at DailyFX. Mr Boutros said he believed the market could fall further and did not recommend investors buy crypto assets.
This year, the defeat also punished technology stocks with large capitalizations. Netflix Inc., Facebook mother of Meta Platforms Inc. and Amazon.com Inc. are down by at least 35% this year.
For now, investors are waiting for inflation data, which should come out on Wednesday. If the report suggests that inflation has peaked, analysts say it could potentially affect the Fed’s aggressive plan.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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