Moody’s, a major provider of credit ratings, announced on Friday that it has lowered Coinbase’s (COIN) long-term credit rating as well as the rating of its guaranteed senior unsecured notes due to “substantially weakened revenue and cash flow generation capacity.”
The long-term corporate family rating (CFR) for Coinbase, which measures the likelihood of a corporate family defaulting on its obligations, was cut from Ba3 to B2, both of which are regarded as non-investment grades. In addition, according to the firm, guaranteed senior unsecured notes were downgraded from B1 to Ba2.
According to Moody’s, the rating action reflects Coinbase’s significantly reduced potential to generate revenue and cash flow as a result of the difficult operating environment for crypto assets, which is characterized by sharp drops in crypto asset prices and decreased customer trading activity. In addition, despite the company’s Jan. 10 announcement of a reduction in its global workforce of about 950 personnel, the ratings agency anticipates its profitability to remain challenging.
The gloomy outlook on Coinbase’s income was also attributed to the repercussions of the FTX exchange’s failure and the potential regulatory tightening that would follow.
Moody’s stated that the path to changes and enhancements in the regulatory framework is highly uncertain and could prove disruptive to participants in the crypto market, even though increased regulatory oversight may ultimately favor the relatively more mature and compliant crypto-asset platforms like Coinbase.
The largest global rating agency, S&P Global Ratings, also lowered Coinbase’s senior unsecured debt rating and long-term credit rating earlier this month for similar reasons.
The largest global rating agency, S&P Global Ratings, also lowered Coinbase’s senior unsecured debt rating and long-term credit rating earlier this month for similar reasons.
Since crypto trading volume continues to be Coinbase’s primary source of revenue, the slowdown in cryptocurrency trading activity after prices fell precipitously throughout the year resulted in an 86% decline in Coinbase shares. It was further gaslighted by the collapse of firms like
Three Arrows Capital, Celsius Network, and FTX.