August 11, 2022: -On Tuesday, Coinbase shares declined in extended trading after the crypto exchange reported a loss of more than $1 billion in the next quarter and missed analysts’ estimates for revenue.

Coinbase’s revenue declined almost 64% as investors exited the crypto market after last year’s theatrical run. Retail transaction revenue came in at $616.2 million, down 66% and less than the $667.1 million consensus from the analysts polled by StreetAccount.

Coinbase reports a $1.1 billion net loss, which is compared with $1.59 billion in net income in the same quarter in the previous year, according to a letter to shareholders. One factor was a $377 million noncash cryptocurrency-related impairment charge. Coinbase’s cryptocurrency assets by June end were worth $428 million, down from about $1 billion at the end of March. More than 40% of the cryptocurrency assets were in bitcoin.

“Q2 was a test of durability for crypto companies and a complex quarter overall,” the company added. “Dramatic market movements shifted user behavior and trading volume, impacting transaction revenue, but highlighted the strength of our risk management program.”

The company added that it had 9 million monthly transacting users, down from 9.2 million in the first quarter but over the 8.7 million StreetAccount consensuses. Macroeconomic and cryptocurrency credit resulted in lower trading volume in the quarter, the company added.

Coinbase is being forced to resize its business in response to market conditions.

Cryptocurrency controversies supported to force down prices in what some called a “crypto winter.” Coinbase’s stock tumbled 75% during the second quarter, while the price of bitcoin plunged by almost 59%. Coinbase added that it was extending its hiring freeze into the foreseeable future and cutting 18% of its headcount. Assets on the platform fell quarter over quarter to $96 billion from $256 billion, primarily because of pressure on cryptocurrency prices, Coinbase said.

“While we did see net outflows in Q2, we observed that the majority of this manners were institutional clients de-risking and selling crypto for fiat as opposed to withdrawing their crypto to another platform,” Coinbase added in the shareholder letter. “As a result, our market share of the total crypto market capitalization declined to 9.9% from 11.2% in Q1.”

Bitcoin accounts for 31% of transaction revenue in the quarter, the highest level since the initial quarter of 2021, while 22% of transaction revenue was associated with ethereum.

Coinbase updates its outlook for the whole year. It now expects 7 million to 9 million every month transacting users, down from 5 million to 15 million three months ago. Management added it expects average marketing revenue per user in the lower $20 range rather than pre-2021 levels.

Armstrong said that he expects the company’s current efforts to result in a “disproportionate share in the following upcycle.”

Coinbase shares dropped nearly 11% in Tuesday’s regular trading session.