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Coinbase loses half its value in a week as crypto slumps

SILVER SPRING, MARYLAND (AP) – Cryptocurrency trading platform Coinbase has lost half its value in the past week, including its biggest one-day drop to date on Wednesday as the famously volatile crypto market weathers yet another slump.

Coinbase reported a USD430 million net loss in the first quarter, or USD1.98 per share, on declining sales and active users. Analysts were expecting profit of eight cents per share.

Revenue was down as trading volumes fell, and active monthly users declined 19 per cent from the fourth quarter.

It’s unlikely those results surprised investors – Coinbase Global Inc shares declined 43 per cent leading up to their earnings release on Tuesday. On Wednesday, shares fell 26 per cent, to USD53.72 per share. On the day of its initial public offering 13 months ago, prices hit USD429 per share.

An analyst who covers Coinbase for investment firm Raymond James, Patrick O’Shaughnessy acknowledged in a note to clients that there was a debate over whether the crypto market was in one of its typical funks or if this was the bubble deflating.

“While management strongly believes the former will prove to be true, we suspect there is more than a bit of truth to the latter, particularly with crypto failing to serve as an inflation hedge thus far in 2022,” O’Shaughnessy wrote.

The icon for the Coinbase app is seen on a smartphone screen. PHOTO: AP

Like much of Wall Street, O’Shaughnessy said his firm expects Coinbase to continue to lose money, and that the “cons of increased crypto regulation down the road will decidedly outweigh the pros”.

United States (US) government officials have made it clear that regulation is coming.

Treasury Secretary Janet Yellen said in April that more government oversight is needed in the fledgling industry and that over the next six months, Treasury would work with the White House and other agencies to develop reports and recommendations on digital currencies.

On Tuesday, Yellen testified to the Senate Banking Committee, warning legislators about stablecoins, which are digital currencies usually pegged to the dollar or a commodity such as gold.

In theory, stablecoins are better-suited to commercial transactions as they essentially promise investors that they can be redeemed for a dollar.

However, a recent run on the TerraUSD stablecoin dropped its value to as low as 30 cents, sowing doubt among investors about the safety of stablecoins.

In a letter to shareholders, Coinbase said it believed that current market conditions were not permanent and it remained focussed on the long-term while prioritising product development.