Moody’s Further Downgrades Coinbase Junk Bonds, Joining S&P

The ratings agency cited Coinbase’s weakened revenue and cash flow generation potential due to the ongoing crypto winter as reasons for the move. S&P downgraded the company earlier this month.

AccessTimeIconJan 20, 2023 at 8:36 p.m. UTC
Updated May 9, 2023 at 4:06 a.m. UTC

Credit-ratings giant Moody’s has downgraded both Coinbase’s (COIN) long-term credit rating as well as its guaranteed senior unsecured notes, it said Friday, citing “substantially weakened revenue and cash flow generation capacity.”

Coinbase’s corporate family rating (CFR), a long-term rating that reflects the relative likelihood of a default on a corporate family's debt, was lowered from Ba3 to B2, both considered non-investment grades. Guaranteed senior unsecured notes were downgraded from B1 to Ba2, the company said.

“The rating action reflects Coinbase's substantially weakened revenue and cash flow generation capacity due to the challenging conditions in the crypto asset operating environment characterized by steep declines in crypto asset prices and lower customer trading activity,” Moody’s said. “Moody's expects the company's profitability to remain challenged despite its [Jan. 10] announcement of a reduction in its global workforce of around 950 employees.”

Moody’s also mentioned the fallout from the FTX exchange’s collapse and the possible resulting regulatory tightening on the crypto industry as a reason for the negative outlook on Coinbase’s revenue.

“Although increased regulatory oversight could ultimately favor the relatively more mature and compliant crypto asset platforms such as Coinbase, Moody's said that the path to changes and enhancements in the regulatory framework is highly uncertain and could prove disruptive to crypto market participants.”

Earlier this month, S&P Global Ratings, the biggest global ratings agency, also downgraded its long-term credit rating and senior unsecured debt rating on Coinbase, for similar reasons.

Shares of Coinbase dropped 86% in 2022, partly because trading volume for cryptocurrencies, which continues to be Coinbase’s main revenue stream, slowed after crypto prices dropped sharply during the year, and crypto firms including Three Arrows Capital, Celsius Network and FTX collapsed.

Despite multiple stock downgrades since December, COIN has recovered so far in 2023 and is currently trading 60% higher since the start of the year, mimicking a trend seen in most cryptocurrencies this month. On Friday, Coinbase shares were up almost 11%.


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Helene Braun

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.