Main American cryptocurrency trade Coinbase noticed its long-term issuer credit standing downgraded from BB+ to BB standing by ranking company S&P International following its newest earnings report this yr.

The company confirmed the downgrade in a be aware on Thursday, pointing towards Coinbase’s weaker efficiency within the second quarter of 2022 as a driving issue. Intensified aggressive threat within the cryptocurrency trade sector was additionally highlighted, with Coinbase dropping market share to rivals this yr.

“The unfavorable outlook displays uncertainties concerning the length of the crypto market downturn and the corporate’s capability 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 threat. 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 be aware conceded that spot buying and selling has grow to be 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 International highlighting whole belongings on Coinbase declining 63% to $96 billion from the primary quarter, which has been pushed by weakened cryptocurrency values and internet outflows from institutional purchasers.

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 world wide additionally led the ranking company to imagine that Coinbase may very well be pressured to evaluation its personal charge buildings, which stay a serious income supply for the corporate:

“We imagine larger buying and selling charges at Coinbase in contrast with friends, mixed with such aggressive pricing actions by rivals, may enhance the chance of charge 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, withCoinbase beneath the scrutiny of ongoing investigationsinto its staking applications and classification of assorted listed cryptocurrency tokens. Aformer Coinbase worker was additionally charged with securities fraudby the U.S. SEC in July 2022, placing the trade additional beneath the microscope.

Regardless of the downgrade, S&P International expects Coinbase to take care of “low total threat” regardless of macro elements which have exacerbated the latest cryptocurrency market downturn.