Crypto is in a difficult phase. Two of the biggest cryptocurrencies, Bitcoin and ether, are "down over 50% since the year began," as per CNET. Crypto exchanges are suffering as well.
On Tuesday, US Largest cryptocurrency exchange, Coinbase, posted a loss of $1.094 billion in the second quarter of the year.
Coinbase's shares dropped about 5% after the close of regular trading. The company was down by 65% this year amid what has been referred to as the latest "crypto winter," as per Bloomberg.
Coinbase refuted SEC claims it distributes unregistered securities after a former employee was accused of fraud.
Coinbase's Loss is Due to Decline in Crypto Values
Bitcoin was at $46,000 and ether at $3,450 when the quarter began on April 1. However, when the quarter ended on June 30, bitcoin and ether slumped to $19,900 and $1,070, respectively.
Coinbase is a cryptocurrency exchange that allows crypto investors to buy and trade over 50 different cryptocurrencies. It is one of the few crypto companies that's publicly trading. The company has gone public in April 2021.
The Q2 situation is an opposite of the situation in the same quarter last year. When crypto was enjorying a historic boom during the second quarter of 2021, Coinbase reported a net profit of $1.6 billion.
The company remained on the top for rest of the financial year, recording $400 million and $840 million in the third and fourth quarters, respectively. However, in the first quarter of 2022, it recorded a loss of $430 million.
According to CNET, customers of Coinbase had $256 billion worth of assets on its platform at the end of the first quarter.
However, the situation turned bad and by the end of the following quarter, the said assets had plunged by 63% to $96 billion.
The dropped in assets' value is due to the "decline in crypto values and customers cashing out their chips for fiat currencies," according to CNET.
Read Also: Coinbase Wallet Now Supports Solana - How About NFTs and DApps on the Blockchain?
Crypto Downturn is 'a Bump on the Road' Says Coinbase
According to a letter to shareholders, Coinbase still has $6.2 billion in cash plus another $428 million in crypto assets.
According to Coinbase, the "loss on macroeconomic conditions which sparked a wider crypto downturn" is the reason for poor performance of the company in Q2.
Speculative assets as well as the tech companies that are not yet transforming massive user bases to massive profits suffered when the Federal Reserve began increasing interest rates to deal with rising inflation in May.
Since crypto is among the most speculative of assets, the drops in valuation have been particularly abrupt.
The situation has been prior to the collapse of Luna, a token with a $15 billion marketcap. It has caused a domino effect leading to several crypto firms' declaration of bankruptcy.
Meanwhile, in a letter sent to shareholders, Coinbase still sounded optimistic about the future. According to the company, the crypto downturn is a bump on the road.
The letter to the shareholders read: "The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets."
Coinbase said that during these down markets, the company remains focused on building great products.
"Each crypto cycle has landed higher than the previous one, due to innovations built during the down turns," the letter further said.
Related Article: Coinbase Blocks 25,000 Crypto Addresses of Russian Accounts
