Coinbase Global Inc reported a larger than expected quarterly loss as investors worried about the rout in risky assets shied away from trading in cryptocurrencies, sending its shares down 6 per cent after the bell on Tuesday.
Retail participation fell by 68 per cent and institutional trading fell 46 per cent at the coin exchange in the second quarter.
The collapse of certain crypto ventures and a broader selloff in financial markets have cause the sector's turmoil in the current quarter, which is why it expects trading volumes to fall further in the current quarter.
In 2022, a downturn in the price of bellwether bitcoin has caused several companies including Coinbase to cut jobs and raises concerns of a drop in interest from small traders.
In the April-June quarter, the monthly transacting users of the coin fell 2 per cent, to 9 million.
Michael Miller, equity analyst at Morningstar Research said that Coinbase did not see a mass migration off its platform during the quarter, but its users are becoming more passive in their investing in cryptocurrencies, despite the fact that it didn't see a mass migration off its platform.
Miller said that the company generates most of its revenue from trading fees, which could be a drag on Coinbase's earnings.
The adjusted loss was $4.76 a share in the quarter, compared to the $2.65 expected by analysts, according to Refinitiv data. Revenue fell 63 per cent, missing market expectations.
Operating expenses went up 37 percent, but the company lowered its annual expenses forecast for technology, development and administration to between $4 billion and $4.25 billion, from $4.25 billion to $5.25 billion.
Miller said that the reduction is unlikely to restore profitability at current revenue generation levels.