No-moat Coinbase COIN reported weak earnings, as low trading volume and much higher expenses led it to report a net loss of $1.98 per share. After incorporating these results, we are reducing our fair value estimate for Coinbase to $131 from $210, as the firm now requires substantially higher cryptocurrency trading volume to generate a profit. A higher breakeven point effectively increases Coinbase's already high leverage to volatile cryptocurrency market conditions. Cryptocurrency markets are highly unpredictable, and Coinbase has said that it is willing to lose up to $500 million in EBITDA per year, making the timing for a return to positive earnings unclear. Coinbase's net revenue fell 35% from last year and 53.2% from last quarter to $1.16 billion, with lower transaction fees the main driver. As we had expected, cryptocurrency trading volume industrywide declined from its peak in the last quarter of 2021 as speculative interest waned. Coinbase's cryptocurrency trading volume shrank 43.5% from last quarter and 7.8% from last year, with retail volume, which generates 95% of Coinbase's transaction fees, falling 62.2% from last quarter. Ultimately, lower revenue and a 111% increase in operating spending were the culprits behind Coinbase's fall from profitability. We generally caution against reading too deeply into Coinbase's quarterly results, since market volatility can rise or fall in short order. However, it must be recognized that Coinbase's cost structure has grown dramatically in just a few quarters, leaving the firm unprofitable despite its underlying asset class still far above 2020 levels. Coinbase's shares are deeply discounted relative to where they were just a couple of months ago and are below our fair value estimate, but we emphasize that a recovery will probably depend on a change in market conditions, which are inherently uncertain, and cryptocurrency markets remain weak.