Moody’s downgrades Coinbase due to bear: Warns it may not be the last

Credit ratings agency Moody’s has downgraded the Corporate Family Rating (CFR) and guaranteed senior unsecured notes of crypto exchange Coinbase, and stated that both ratings have been placed under review for further downgrade.

The CFR, a rating assigned to reflect Moody’s opinion of a company’s ability to honor its financial obligations, was downgraded from Ba2 to Ba3 which is considered as below non-investment grade.

Senior unsecured notes are a type of debt a company holds that is not backed by any assets and in the event of bankruptcy must be repaid before any others. Moody’s downgraded Coinbase’s from Ba1 to Ba2.

Earlier in May, Cointelegraph reported Coinbase’s junk bonds tanked in response to an underwhelming first quarter and since the report, the bonds have continued to fall a further 9.5%.

In its rationale for the downgrades, Moody’s highlighted Coinbase’s revenue model “is tied to trading volumes, transaction activity per user and overall crypto asset prices.” It said the steep price decline in crypto over the past months has caused customer trading activity to wane, which in turn caused weaker revenue and cash flow to the company.

The uncertain environment forced Coinbase to layoff about 18% of its staff on June 14. But even with this measure, Moody’s said it expects Coinbase’s profitability to “remain challenged in the current environment”.

Competition for customers has also been heating up in the United States after Binance.US began offering zero-fees spot trading for Bitcoin (BTC). The offer follows in the footsteps of trading platform Robinhood which pioneered no-commission crypto-trading in 2018.

In a bid to attract users to the platform, on June 23 Coinbase added five new Ethereum (ETH) ERC-20 tokens plus the ability for users to send and receive some assets on the Polygon (MATIC) network along with USD Coin (USDC) on Solana (SOL).

Related: Coinbase to shut down Coinbase Pro to merge trading services

Moody’s said it could call out for further downgrades should crypto prices continue to fall and if trading volumes on the exchange remain the same or fall further. It will also look at whether the firm can reduce expenses, its ability to maintain talent as well as potential “crypto asset regulatory developments.”

The ratings agency added that Coinbase’s ratings could be upgraded again in the future if it can generate a profit even during a bear market and diversifies its revenue through other streams not associated with trading and cryptocurrency prices, noting that crypto transaction-based revenue represented 87% of Coinbase’s net revenue in Q1 2022. 

Coinbase’s shares were up 13.4% to close at $58.88 on Thursday, but fell just over 1% in after hours trading. Year to date, its shares are down nearly 77%.

All Dutch and English crypto news!

UNCTAD takes aim at crypto in developing world in a series of critical policy briefs

The United Nations Conference on Trade and Development (UNCTAD) released a policy brief Wednesday on cryptocurrency. It is the third brief in a row the...

Robinhood to face class action lawsuit from meme stock debacle: Report

Cryptocurrency and stock trading platform Robinhood will allegedly face allegations of market manipulation as part of a class-action lawsuit brought by investors in "meme stocks"...

Cardano price: Analyst explains ADA price outlook over coming weeks

Cardano (ADA) is trading near $0.53, just about in the green on Thursday evening as the crypto market looks to hold onto yesterday's gains. The ADA/USD...

Maven 11 launches $30M lending pool on Maple as borrowers turn to DeFi

Netherlands-based crypto investment firm Maven 11 has launched its third lending pool on Maple Finance, giving borrowers access to liquidity amid the bear market. The $30...

Beste exchanges

Koop je crypto bij Bitvavo