Crypto is in a bad way. Bitcoin and ether, the two biggest cryptocurrencies, are down over 50% since the year began. It's not only crypto traders who are feeling the pain; crypto exchanges are too. On Tuesday, Coinbase, the biggest exchange in the US, reported a loss of $1.094 billion in the second quarter.

When the quarter began, on April 1, bitcoin was at $46,000 and ether at $3,450. By the end of the quarter on June 30, those prices had slumped to $19,900 and $1,070, respectively. Coinbase is an exchange where crypto investors can buy and trade over 50 different cryptocurrencies. Coinbase is one of the few crypto companies that's publicly traded having gone public in April 2021.

It's a sharp reversal from the same quarter last year. In the second quarter of 2021, when crypto was experiencing a historic boom, Coinbase enjoyed a net profit of $1.6 billion. It remained in the black for the rest of the financial year, making $400 million and $840 million in the third and fourth quarters, respectively, before losing $430 million in the first quarter of 2022.

At the end of the first quarter, Coinbase's customers had $256 billion worth of assets on its platform. By the end of the next quarter, that amount had dropped by 63% to $96 billion, a result of both the decline in crypto values and of customers cashing out their chips for fiat currencies. 

Coinbase has $6.2 billion in cash and another $428 million in crypto assets, according to a letter to shareholders.

The company largely blamed the loss on macroeconomic conditions which sparked a wider crypto downturn. When the Federal Reserve in May began hiking interest rates to battle rising inflation, speculative assets, including tech companies that have yet to transformed massive user bases to massive profits, immediately took a hit. With crypto being among the most speculative of assets, the valuation drops have been especially precipitous. 

That was before the collapse of Luna, a token with a $15 billion marketcap, caused a contagion effect that's seen several crypto firms declare bankruptcy. 

In a letter to shareholders, Coinbase's leadership wrote of the crypto downturn as a bump on the road and sounded an optimistic note about the future.

"The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets," the letter reads. During these down markets, we remain focused on building great products... Each crypto cycle has landed higher than the previous one, due to innovations built during the down turns."