The Bitcoin crash has dealt a huge blow to Coinbase.
The cryptocurrency exchange platform reported a loss in its first quarter last May 10. Coinbase revenue dropped 27% from last year, and shares fell more than 25% last May 11. This makes it their lowest level yet.
The stocks for the said cryptocurrency brokerage plummets by more than 75% this year while trading about 85% below their price from November last year. All these happened within the past week.
The drop in Coinbase’s stock coincides along with the value of bitcoin, ethereum, and other cryptocurrencies for some few months now. Earning reports of Coinbase show 48% of their revenue is from bitcoin and ethereum in the said quarter.
This performance is due to inflation that has been happening since August last year. As a result, bitcoin prices dropped below $300,000, and there are reports of decreased number of assets, users, and trading volume.
Decreasing crypto asset prices and volatility in Coinbase have continued since late 2021. However, the company remains optimistic and excited about the future of crypto.
Is Coinbase going bankrupt?
On the other hand, investors are worried about Coinbase’s bankruptcy language regarding quarterly earnings filing with the Securities and Exchange Commission.
In the event of a bankruptcy, the crypto assets the cryptocurrency company currently holds will be subject to bankruptcy proceedings. If this happens, Coinbase may consider customers as general unsecured creditors. In other words, customers will not be able to access their funds in Coinbase.
Coinbase CEO Brian Armstrong assured confused customers in a series of tweets that they are not at the risk of bankruptcy and that the funds will always be safe. However, he said that the SEC required them to include the bankruptcy warning. The new SEC policy is a required disclosure for cryptocurrency companies holding assets for third parties.
Coinbase is considered the most popular cryptocurrency company, courtesy of a Super Bowl ad they featured this year. It shows a QR code that moved around the screen for a minute and nothing more.
Moreover, it is currently occupied with adding more cryptocurrencies to its platform. The crypto company launched an NFT (aka non-fungible tokens) market. Thanks to art and collectible enthusiasts, these digital assets are starting to get more popular.
Coinbase went public last year through Nasdaq, and its worth was around $100 billion. Now, the market value drops to approximately $15 billion.