Here's why Coinbase stock crashed today

The exchange operator's losses are mounting as crypto prices plummet.

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A man sits at his computer with his head in his hands while his laptop screen displays a Bitcoin symbol and his desktop computer screen displays a steeply falling graph.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

What happened 

Shares of Coinbase Global (NASDAQ: COIN) plunged 26% on Wednesday after the digital asset trading platform reported an unexpected loss in the first quarter. 

So what

Coinbase generated net revenue of nearly $1.2 billion. That represented a decline of 27% year over year and 53% sequentially. It was also significantly below Wall Street's estimates, which had called for revenue of almost $1.5 billion. 

The brutal downturn in the cryptocurrency market in recent months has weighed heavily on Coinbase's business. The exchange operator's monthly transacting users declined by 19% compared to the fourth quarter. Its trading volume, in turn, fell 44% to $309 billion.

At the same time, Coinbase spent heavily to fund its growth initiatives. Declining sales combined with rising expenses led to the company posting a net loss of $430 million, compared to net income of $840 million in the fourth quarter and $771 million in the year-ago period. That resulted in a net loss per share of $1.98. Analysts had expected Coinbase to report per-share profits of $0.17. 

Now what

With the prices of Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and many other cryptocurrencies declining further so far in the second quarter, Coinbase warned of a continued deterioration in its transacting user and trading volume metrics. Yet the company plans to sustain its investments in the build-out of its non-fungible tokens (NFTs) marketplace and crypto derivatives exchange, so expense levels are projected to remain relatively high. Thus, investors are concerned that Coinbase could rack up more losses in the quarters ahead. 

This article was originally published on All figures quoted in US dollars unless otherwise stated.

Joe Tenebruso has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ehereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

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