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Leading U.S.-based cryptocurrency exchange Coinbase had an unusually tough week after releasing a disappointing first quarter earnings report, which included a controversial disclosure filing with the United States Securities and Exchange Commission (SEC).
Coinbase Lost $430 Million in Q1
At the close of market hours on Tuesday, the American crypto exchange released its first quarter earnings for 2022, showing a net loss of $430 million compared to the $771 million net profit it generated in the previous quarter.
The company was down by 44% as shown in the report leading to a 35% drop of its year-to-year income to $1.16 billion, missing analysts’ expectation of $1.5 billion.
The exchange’s active monthly users also dropped by 19% to 9.2 million against the 11.4 million reported in Q4 2021.
Coinbase CEO Brian Armstrong attributed the company’s poor financial results to “weaker market conditions,” as the exchange generates about 85% of its revenue from transaction fees.
Coinbase Files a New Disclosure
Along with its first quarter earnings report, Coinbase filed a new disclosure with the SEC, which covers how the company treats digital assets it holds on its platform.
The filing stated that custodially held assets could be considered as part of the company’s property in a case of bankruptcy and customers would be treated as “general unsecured creditors.” This means that Coinbase customers would be least considered in the event of bankruptcy as they would be the last to make claims.
The new disclosure caused panic among Coinbase users as they feared their assets were not safe with the exchange and that the company may be on the brink of bankruptcy.
Although Armstrong was quick to reassure users that their funds were safe and that the company was at no risk of bankruptcy, it did not stop Coinbase shares from hitting an all-time low.
Coinbase Shares Hit All-Time Low
On Tuesday, after the company released its Q1 earnings report, its shares lost more than 20% in after-hours trading, and touched an all-time low of $52.88 the next day.
According to MarketWatch, COIN was down by 84% from its 52-weeks all-time high (ATH) of $368.90 as each share traded at $52.8 on Wednesday.
Although Coinbase shares have since recovered and closed the week at $67.87, COIN is still 80% down from its ATH. This indicates that COIN dip was more severe than Bitcoin, which is just 56% down from its ATH price of $69,000.
Coinbase Eligible to Provide Securities Offerings
Despite having a gloomy week as its shares plummented, Coinbase filed a shelf registration statement with the SEC to allow the company to offer and sell securities in the future.
Although the exchange revealed it has no current plans to provide such offerings, the filing will give Coinbase access to the capital market as a digital asset issuer. The filing will also serve as an important tool for flexibility in terms of fundraising.
Coinbase Premium Turns Negative
Meanwhile, as the crypto market struggles, the BTC premium on Coinbase dropped to negative levels for the first time in three years due to market market turbulence.
The negative premium suggests that whales and other big players with large bitcoin portfolios have sold their coins on the exchange, leading to price depreciation.
According to blockchain analytics firm CryptoQuant, Coinbase BTC Premium started turning negative on May 2 indicating huge sell-offs from investors dumping their assets on the platform.
Bitcoin’s value has tanked significantly since the start of the month. The cryptocurrency traded as low as $25,000 per coin on Thursday.