Coinbase Outlook Looks Poor, S&P Global Says

Coinbase outlook looks poor (“negative”) according to S&P Global, a credit rating company. The aforementioned company stated in a letter that Coinbase’s outlook looked poor i.e. that it was “negative”.

This news comes amidst larger problems for Coinbase like frightening quarterly losses and SEC probes.

Coinbase Outlook Looks Poor

In light of poor profits and competitive pressure, S&P Global cut Coinbase’s senior unsecured debt rating and long-term issuer credit rating from BB+ to BB.

“Competitive risk has intensified in the crypto exchange sector, with the company’s market share decreasing this year,” S&P Global wrote. “We believe that as a result of market share erosion and a higher risk of margin compression, cyclical variations (peak-to-trough changes in revenue, EBITDA, and EBITDA margin) for Coinbase have exceeded our previous expectations, leading us to revise our assessment of financial risk.”

According to the rating agency, its evaluation also took into account uncertainties about the length of the present crypto bear market and the possibility of future market share degradation.

The price of Coinbase shares on Thursday fell by more than 10% to $84 a share. Last October, its shares rose as high as $350.

Two days before S&P’s note, Coinbase disclosed that its second-quarter trading volume fell short of consensus revenue forecasts and dropped by about 30%, from $309 million in the first three months of 2022 to $217 million. As opposed to a $430 million loss in the first quarter, the exchange reported a net loss of $1.1 billion during the period.

U.S. securities regulators are looking at Coinbase’s token listing procedures, staking programs, and yield-generating products, according to the company’s quarterly report.

Coinbase Shares Fell At Beginning of Week

Following news that trading volume on its cryptocurrency exchange had significantly decreased during the second quarter, shares of Coinbase Global (COIN) plunged by around 5%.

According to a shareholder letter distributed on Tuesday, customer trading activity totaled $217 billion over the time period, down from $309 billion in the first quarter of this year. According to data gathered by FactSet, Coinbase’s total sales came in at $803 million, falling short of the average analyst projection of $873.8 million.

Since its IPO last year, Coinbase’s price has fallen as a result of a slowdown in retail trading caused by the cryptocurrency and equity market crash, which has forced the business to cut jobs and concentrate on cost-cutting measures.

In comparison to the first quarter’s $430 million loss, the exchange reported a net loss of $1.1 billion for the second quarter. In addition, Q2 adjusted Ebitda was $151 million lower than Q1 adjusted Ebitda, which had increased by $20 million.