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Coinbase’s recent quarterly report led S&P Global Ratings to downgrade its long-term issuer credit rating from BB+ to BB, with a negative outlook.
rating agency Said On Aug. 11, weak revenues and competitive pressures on cryptocurrency exchanges weakened coverage, and increased risk of market share erosion and margin compression pushed coinbase cyclical volatility higher than previously expected. increased over time, he said.
S&P Global pointed out that Coinbase’s poor second quarter reporting could be attributed to increased uncertainty and increased competition in the cryptocurrency market. As a result, Coinbase reportedly saw a 30% drop in Q2 trading volume, while exchange-wide trading volume fell only 3%.
Furthermore, S&P Global notes that Coinbase’s market share has declined in 2022 as competitive risks have increased in the cryptocurrency exchange sector.
The rating agency said:
The negative outlook reflects a period of weakness in the cryptocurrency market and uncertainty regarding the company’s ability to operate efficiently by carefully managing its operating expenses.
The rating agency also said the SEC’s ongoing investigation into the exchange further exacerbates the uncertainty affecting Coinbase’s growth projections.
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The SEC has launched securities fraud charges against former employees and, more recently, the recent disclosure of an investigation into a staking program and the classification of certain listed assets, increasing the regulatory headwinds for Coinbase.
Hard times for Coinbase
Coinbase has battled challenges related to declining market share and constant scrutiny by the U.S. Securities and Exchange Commission (SEC).
On August 9th, Coinbase posted its biggest ever loss in its second quarter report. Assets held on the exchange fell to $96 million while recording a net loss of $1.1 billion. Transaction volume for the quarter was just $217 million, down 30% from Q1 data of $309 million.
The SEC is currently investigating exchanges to list unregistered securities and offer high-growth staking and yield-generating products.
In addition to the legal battle, two New York-based law firms deliberately misled the public by Coinbase’s failure to explicitly disclose its compliance policies and business activities related to customer assets. I filed a lawsuit claiming that
