Main American cryptocurrency trade Coinbase noticed its long-term issuer credit standing downgraded from BB+ to BB standing by ranking company S&P World following its newest earnings report this 12 months.
The company confirmed the downgrade in a observe on Thursday, pointing towards Coinbase’s weaker efficiency within the second quarter of 2022 as a driving issue. Intensified aggressive danger within the cryptocurrency trade sector was additionally highlighted, with Coinbase dropping market share to opponents this 12 months.
“The damaging outlook displays uncertainties in regards to the length of the crypto market downturn and the corporate’s capacity to function effectively by managing working bills prudently.”
The downgrade additionally mirrored the potential for “additional market share deterioration” pushed by the aggressive panorama and regulatory danger. The ranking company famous that whole buying and selling quantity at Coinbase declined 30% quarter on quarter, whereas whole cryptocurrency spot buying and selling quantity throughout all venues declined solely 3%, resulting in a decrease market share.
The observe conceded that spot buying and selling has change into extra concentrated amongst market-makers and high-frequency buying and selling companies, of which Coinbase has a much smaller market share.
The continuing cryptocurrency bear market has additionally left its mark, with S&P World highlighting whole property on Coinbase declining 63% to $96 billion from the primary quarter, which has been pushed by weakened cryptocurrency values and internet outflows from institutional shoppers.
Associated: Coinbase posts $1.1B loss in Q2 on ‘quick and livid’ crypto downturn
Binance’s transfer to put off its Bitcoin buying and selling charges all over the world additionally led the ranking company to imagine that Coinbase could possibly be compelled to assessment its personal payment constructions, which stay a serious income supply for the corporate:
“We imagine increased buying and selling charges at Coinbase in contrast with friends, mixed with such aggressive pricing actions by opponents, may enhance the danger of payment compression in its retail channel (which generated about 80% of the corporate’s whole revenues within the first half of 2022).”
Regulatory pressures are additionally a priority, with Coinbase underneath the scrutiny of ongoing investigations into its staking packages and classification of assorted listed cryptocurrency tokens. A former Coinbase worker was additionally charged with securities fraud by the U.S. SEC in July 2022, placing the trade additional underneath the microscope.
Regardless of the downgrade, S&P World expects Coinbase to take care of “low total danger” regardless of macro components which have exacerbated the current cryptocurrency market downturn.