Rating agency Moody’s downgraded Coinbase’s corporate rating as well as the rating on senior notes. However, the agency said the outlook for the digital asset exchange is now stable.. The pressure on Coinbase remains in terms of profitability without a sustained increase in the price of cryptoassets. Moody’s doesn’t seem convinced she will show up.
Moody’s decision
Moody’s is a financial rating agency that rates the quality of corporate and government credit. Moody’s ratings range from Aaa (highest) to C (lowest). These ratings help investors assess the risks of investing in a company or government. Indeed, Moody’s ratings are widely used in the financial world and can have a significant impact on the interest rates that companies and governments have to pay to borrow money.
Coinbase had its corporate rating and senior notes reduced by Moody’s. A promissory note is a debt obligation that obliges the repayment of a loan, at a predetermined interest rate, within a defined period. Notes are similar to bonds, but generally have an earlier maturity date than other debt securities, such as bonds. This justifies this decision by “difficult conditions in the operating environment of cryptographic assets”. According to the agency, Coinbase’s outlook is stable. The reason is that its liquidity position is currently healthy and is absorbing the company’s ongoing cash flow drain. This stability is due in particular to the company’s recent job cuts.
The weakening of Coinbase due to the context
Moody’s downgraded Coinbase’s corporate rating from Ba3 to B2. At the same time, its senior notes were changed from Ba2 to B1. This decision reflects the substantial weakening of Coinbase’s revenue and its ability to generate cash flow. This collapse is of course the result of the current state of the cryptocurrency market in bear market.
Another factor contributing to the rating is the uncertainty stemming from possible regulatory changes following the collapse of FTX. According to Moody’s, a sudden tightening of regulation and related oversight could negatively impact Coinbase’s revenue as well as increase its cost base.
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