Coinbase brings the mood down

Good morning! Welcome to The Daily Moon. EA Sports’ most popular game, FIFA, is dead. Sort of. FIFA, the governing body for football, and EA Games have been locked in negotiation for a few months. But the two have decided to go their separate ways. EA Games will launch a football game called EA Sports FC, while FIFA will look for another partner who can be the new FIFA game developer. Gaming will not be the same again. 

A Clean Spark Of Hope

In a world where BTC prices have plummeted 21% in the past week, a mining company surpassing analyst estimates is like an hour of rain during a heatwave.

Cleanspark reported revenue of $41.6 million in the second quarter of the year and an Ebitda of $22.5 million.

What’s the BFD?For one, Cleanspark uses renewable energy to mine crypto assets on its large server farms. There are a few more positives in this development (we’re on a roll today):

1. It beat market estimates by $400,000 and mined 36% more BTCs quarter-on-quarter. 

2. Over 90% of its operating profits came from just mining the BTC. It minted 899 new tokens over this quarter. Roughly 10 BTC/ day. 

3. Currently, the company has no long-term liabilities on its books and ended the quarter with $1.9 million in cash and $17 million in digital currencies.

But the adjusted Ebitda was down 7% from the previous quarter. Back then, the adjusted Ebitda was ~$24 million.

What’s the growth spark?It was Bitcoin conversions that funded Cleanspark’s growth. Bitcoin conversions mean exchanging bitcoin for any other crypto or fiat currency. The difference in their market values at the time of trading is where companies make gains. It’s a green win. 

Talking about the environment Companies such as Cleanspark are path-breaking and are carving out a niche towards sustainable, environment-friendly mining practices. But that does little to compensate for the fact that crypto mining is very energy-intensive and has a high carbon footprint. A green lobby group recently wrote to US President Joe Biden with the request to regulate crypto mining. They insist it harms small communities by being a source of noise pollution and electricity price hikes and reduces community access to renewable energy.

Their argument is supported by the fact that Bitcoin’s current proof-of-work mining mechanism has an estimated annual energy consumption of 130 TWh. That's close to the yearly energy consumption of countries such as Argentina and Ukraine.

Coinbase Is Hurting 

Coinbase was celebrated when it came to India, but things got rocky. Fast. And this year, so far, doesn’t look good either. The company’s financials have made life difficult. The stock took a beating and fell 14% in pre-market trade. Just for context, the stock has lost 70% of its value since March. 

That doesn’t look goodNo, it doesn’t. There are a series of problems for Coinbase. 

1. The Q1 revenue fell 27% to $1.17 billion from a year ago. Analysts had predicted that the company would probably break even this quarter, but it recorded an unexpected $430 million loss.

2. The user numbers are dropping. The company has about ~9.2 million active users. It’s a good number until you compare it to the fact that it was 11.4 million just a quarter ago. 

3. Trading volumes don’t look good either. Coinbase recorded $309 billion in transactions compared to $335 billion a year ago. 

There’s more. It’s not being discussed as widely. Coinbase said in its earnings release that customers could be made party to bankruptcy proceedings. That was not received well by investors. However, Coinbase CEO Brian Armstrong had to explain that it was just a mandatory disclosure. 

So, what about India?Yes, so we started with Coinbase’s India ambitions. Its launch here was marred with regulatory pushbacks after the exchange had to disable UPI payments. And now, Armstrong has revealed that Coinbase was forced to halt UPI after “pressure” from the RBI. But, he has promised to return. 

Where is Coinbase headed?Coinbase is trying its bit to diversify the revenue stream. For starters, it has opened up an NFT marketplace. It wants to reduce reliance on trading fees, and get young investors to take the digital token dive. 

And that’s it for today. If this email was forwarded to you, please consider subscribing. It’s free. We’ll never show you an ad or charge you for this. We swear.

Who are we? There is a lot happening in our world. Everything has layers, and each layer has to be carefully peeled so you, the reader, know how the world of money is changing every day. That’s our promise. Help you unpeel the onions, which are the public markets in the US, India, and crypto, so that you know just a little more.