It has been quite the 24 hours for crypto and Coinbase in particular. The leading crypto exchange in the United States falls under total pressure: bad disclosure reports, collapsing markets and fresh U.S. inflation stats, which still are very close to a 40-year high.
All of these factors resulted in Coinbase shares slumping almost 23% at the market opening—its historical all-time lows.
Let's look deeper at what caused such a great fall.
First of all, the cryptocurrency exchange posted a net loss attributable to shareholders of $430 million for the first quarter of 2022, compared to a profit of $771 million last year. Due to reports, the number of monthly transacting users (MTU) rose to 9.2 million by the first quarter, which is up 1.5 times from 2021, but crypto market turbulence and the poor performance of most assets resulted in a decline of trading volume down 7.8% from a year earlier.
At the same time, the crypto world has experienced the Terra collapse, with its LUNA token value dropping more than 90%, and its own stablecoin, UST, losing its peg to the dollar, at the moment totaling $0.225 per 1 UST. The crash in the market capitalization of the top 10 cryptocurrencies majorly affected the whole market and added negativity to the downward trend in which crypto is headed right now.
At last, U.S. inflation fell to 8.3% in April from 8.5% in March, according to the official report. The markets were expecting to slow down to 8.1%, and their expectations were not matched. Along with that, core monthly inflation accelerated from 0.3% (m/m) to 0.6% (m/m). It is getting serious.
Clearly, the market does not care as much about inflation itself as it does about how much that inflation affects the decisions of the Federal Reserve. The Federal Reserve is looking more at core inflation, whose acceleration is understandably causing serious anxiety for investors.
Markets reacted negatively to the data. That is where Coinbase stockholders found themselves with up to 23% losses, with price per share down 78% from last year's IPO.
What's next for the crypto community in the U.S.?
Despite all the negativity, Coinbase co-founder and CEO Brian Armstrong rushed to reassure the public about "some noise about a disclosure," stating that Coinbase users' funds are safe and protected, there is no risk of the company going bankrupt, and if you want to store your own crypto, you can use Coinbase Wallet—a self-custodial wallet solution.
1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe at Coinbase, just as they’ve always been.— Brian Armstrong - barmstrong.eth (@brian_armstrong) May 11, 2022
The crypto community in the U.S. really should not worry about opportunities to realize their investment goals because Coinbase's bad business could turn into good fortune for Binance.US.
A subsidiary of one of the world's largest cryptocurrency exchanges, which has recently become much more active in the U.S. market, will definitely be looking for its piece of this fat pie during these hard times.
At the end of the day, healthy competition always leads to better quality for the users.