Moody’s has downgraded the Corporate Family Rating and guaranteed senior unsecured notes of crypto exchange Coinbase, stating that both ratings have been placed under review for further downgrade.
The CFR, is a rating assigned to reflect Moody’s opinion of a company’s ability to honour its financial obligations, was downgraded from Ba2 to Ba3, which is considered below non-investment grade.
Senior unsecured notes are a type of debt a company holds that is not backed by any assets and, in the event of bankruptcy, must be repaid before any others. Moody’s downgraded Coinbase from Ba1 to Ba2.
Moody’s highlighted the rationale and that Coinbase’s revenue model is tied to trading volumes, transaction activity per user and overall crypto asset prices. It said the sharp price decline in crypto over the past months has caused customer trading activity to wane, which in turn caused weaker revenue and cash flow for the company.
The uncertain environment forced Coinbase to lay off about 18% of its staff on June 14. But, even with this measure, Moody’s said it expects Coinbase’s profitability to remain challenged in the current environment.
