Ratings agency Moody’s has downgraded cryptocurrency exchange platform Coinbase’s corporate debt, as volatility continues to roil digital asset markets.
The agency lowered Coinbase’s guaranteed senior unsecured notes to Ba2 from Ba1 and its corporate family rating debt to Ba3 from Ba2. Debts with ratings of Ba1 and below are considered “junk” bonds.
Moody’s placed its ratings on review for further downgrades, saying Thursday’s move “reflects Coinbase’s substantially weaker revenue and cashflow generation due to the steep declines in crypto asset prices that have occurred in recent months”.
The agency said the company’s profitability would “remain challenged”.
Moody’s noted that the rapid decline in crypto asset prices accelerated during the second quarter of 2022 and will likely result in lower transaction revenue for the remainder of the year.
Between 2020 and 2021, Coinbase experienced rapid increases in revenue due to higher asset prices, higher levels of volatility, more users and higher transaction revenue per user compared to prior periods.
The firm’s rapid growth also fuelled rising expenses.
Coinbase plans to lay off 1,100 employees or 18% of its workforce, chief executive Brian Armstrong said last week.
The exchange indicated that its global workforce will be around 5,000 employees as of the end of the second quarter, still up from 3,730 at the end of 2021.
Much of the firm’s rapid hiring was in areas to support product innovation, international expansion, compliance, scalability and reliability.
- George Russell
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