In April 2021, the launch of Coinbase, a crypto exchange, was a significant milestone for the growing cryptocurrency sector. However, 2022 has been a challenging year for the organization, as it struggled with the cryptocurrency market collapse that pushed down the price of its stock and led to the termination of hundreds of its employees. Because of disappointing peak results last week, Coinbase announced that user engagement declined in the second quarter. The crypto exchange reported a $92 billion drop in trade volume and is expected to drop throughout the remaining year. Coinbase’s quarterly profit fell short of predictions, with net sales of $802.6 million. In the very same period in 2021, net sales reached almost $2 billion.
According to the shareholders of Coinbase, “it is not as nice as it looks and not as terrible as it looks” is a motto that guides the company’s activities. Coinbase has been there through several phases of the price loop of the cryptocurrencies; hence, it can be considered an “all-weather” organization. The crypto exchange is still thinking forward and making plans for the next phase. Post-hours trading saw a roughly 5% drop in the organization’s stock price. About two-thirds of the stock’s worth has been knocked down till now. However, many crypto fans believe that one of its biggest benefits is that it isn’t subject to government regulations, unlike the gambling industry and the kind of regulations you see at a PayPal casino.
Bitcoin continues to be the most actively traded cryptocurrency on Coinbase, generating around 31% of quarterly trade revenue. Only about a quarter of the money made through trades was Ether, while the other half came from other cryptocurrencies. In response to the company’s announcement on June 14, Coinbase said it would reduce its workforce by 18%, thereby lowering its full-year expenses. The organization additionally said it would take a break from its product development efforts. Despite the recent decline in the market, Bitcoin was still trading at around $23,163 last week. Since January, the largest cryptocurrency by market cap has lost about 70% of its value. Although the second quarter’s results were consistent with the company’s outlook in May, Coinbase assures that they are adjusting to the current market conditions.
Will Crypto Continue to Slide or Bounce Back?
High inflation has undercut the lure of low-profit, high-growth investments. A string of harsh announcements from top companies like Coinbase has raised doubts about the limitations to their potential development, all of which have contributed to the current crash in tech stocks. Retail investors are disproportionately pushing the crypto market, seeing it as a tradeoff between day trading and open betting. Crypto investors may be compelled to sell their assets as rising prices strike, considerably worsening the industry’s financial situation.
The above findings provide insight into the difficulties Coinbase, the leading crypto exchange platform, is experiencing during major turbulence in the cryptocurrency market. Recent challenges for Coinbase have prompted concerns about giving up its lead early in the sector as rivals like FTX and Binance grow stronger in the crypto crash. Coinbase may have gotten its start early, but struggled to gain momentum in international markets. The company’s most awaited release of the year, a trading platform for digital collectables called non-fungible tokens (NFTs), was welcomed with weak customer demand.
On one level, it’s clear: those who traded their crypto assets at the beginning of April made money, while those who bought them lost money. It’s such a frequent thing in the industry that the survivors have adopted a motto: “HODL“, i.e., Hold On for Dear Life. It is an abbreviation for the assurance that the good times will return and that only the people who don’t sell the crypto assets at the download will benefit from the next surge.
Will There Be Regulations Put into Place?
Coinbase has been scrutinized by authorities for its faulty regulations. An ex-employee at Coinbase was charged with insider trading by the US Department of Justice last month. In a similar development, the SEC (Securities and Exchange Commission) claimed that it saw some digital currencies listed on Coinbase as securities. Thus, they are susceptible to regulations like bonds or stocks, a viewpoint with which Coinbase has disagreed. Coinbase told its investors last week that the SEC had given the organization a “voluntary request for details” in May related to the listing procedure. The company also stated that it still doesn’t know if this inquiry will become an official investigation.
Even so, the leaping QR code in Coinbase’s Super Bowl ad has helped make it one of the most reliable crypto exchange platforms in the US. Last week, Coinbase announced a relationship with BlackRock, the biggest asset management company worldwide, to facilitate Bitcoin trading for institutional clients.
The crypto market has overcome such crashes before. That prompted the recent talk about a “crypto winter”: it’s awful, but winter always gives way to spring. The expectation is that crypto investors can ride this one through until the market cools down. There is a chance that things may go differently this time around; therefore, it might be wise to continue to stay. Most of the crypto’s expansion has come from tapping into the ever-expanding customer base. However, the scale and scope of the recent crash may make it difficult to find new clients. To top it all off, those who save their assets in crypto will ultimately need to sell them to pay bills, and they cannot expect to do so since no one will buy.
If all the investors who made a loss in the crypto crash themselves or know somebody who did, the amount of ignorant capital available to buy the next time will be quite low anyway. Nevertheless, in the meanwhile, work on developing new products for customers is still ongoing. Perhaps someone will have developed a “play to earn” online game that is truly entertaining and even an NFT that thousands of people will prefer to own. In any case, there isn’t much time left.
