Coinbase stock is down 10% today, falling by more than 4% in after hours trading following an underwhelming earnings report for the second quarter of the year.
Coinbase underperformed compared to analyst expectations, posting $808.3 million in revenue for Q2 compared to an estimated $832.2 million that would be brought in by the cryptocurrency exchange.
The total number of users conducting transactions on the platform totaled 9 million, down by 200,000 over the past three months. Compared to the same quarter a year prior, Coinbase showed a gain of the same amount, adding 200,000 monthly active users over the course of a year.
The company notched 1.1 billion in net losses over the past financial quarter, its second quarter of negative income in a row. In Q2 of last year, Coinbase’s net income reached 1.6 billion. Coinbase makes its money on fees paid by users when making trades on Bitcoin and other cryptocurrencies. Trading volume on the exchange was down 29% in Q2.
Coinbase made its debut on Wall Street when it was listed on the Nasdaq last April as the first publicly-traded cryptocurrency exchange. At one point its stock price rose as high as $342, but as of this writing, it’s down by over 74% to just over $87 per share.
In April, Coinbase announced it would launch its services to investors in India. But within a week, the company significantly scaled back its trading services following criticism from an Indian regulator. In terms of its business strategy for India moving forward, Coinbase Vice President of Investor Relations Anil Gupta told Decrypt, “It's a huge market, so we're excited about the opportunities there.”
While the Securities and Exchange Commission (SEC) gave Coinbase the green light to go public last year, the firm found itself within the regulatory agency’s sights late last month. The SEC claims nine tokens on the exchange are unregistered securities, while Coinbase maintains it does not sell any securities.
“We remain committed to being the most trusted, most compliant, most regulated crypto company out there,” Gupta told Decrypt. When asked how the SEC’s determination will impact future listings, he said Coinbase has “pushed for regulatory clarity.”
The SEC’s determination was disclosed in insider trading charges brought against three individuals, including a former Coinbase project manager with prior knowledge of tokens that would be listed on the exchange. Ark Invests CEO Cathie Wood said the “regulatory” uncertainty that followed was so intense the company parted with $75 million worth of Coinbase shares.
“Once this came to light, we immediately conducted an investigation, we found out what was going on, we provided information to law enforcement, and it's a stern message that this type of behavior is unacceptable,” Gupta told Decrypt, referencing the illegal insider trading charges. “We have to do everything we can and to weed out that kind of activity and make sure it doesn't happen.”
However, Coinbase’s stock price swung upwards sharply last week, rising on news that it had secured a deal with Blackrock, the world’s largest asset manager. Coinbase will provide the financial titan with cryptocurrency trading technology for institutional investors on its Aladdin platform.
Editor's note: this article has been updated to include comments from Coinbase Vice President of Investor Relations Anil Gupta.