The crypto market is down in 2022, and it should be no surprise that Coinbase's (COIN -3.24%) results are suffering as a result. Coinbase reported second-quarter earnings after the market closed on Tuesday, and the numbers weren't good by any measure. 

Revenue fell 60% from a year ago to $803 million, and the company swung from net income of $1.6 billion to a net loss of $1.1 billion. But like most earnings reports, this one requires some context. Here's what you need to know about Coinbase's results. 

Trading is driving results

The reality is that trading drives all financial results for Coinbase, at least for now. In the second quarter, trading volume was $217 billion, down from $462 billion a year earlier. The bigger problem is that retail trading dropped from $145 billion to $46 billion, and that's where all of Coinbase's money is made. 

Net retail revenue was $616.2 million in the quarter, down from $1.83 billion a year ago and compared to $39.0 million in net revenue from institutional clients. Retail is where the money is made, and retail is down by a lot. 

On the subscription and services side, the business is doing better. Revenue was up from $102.6 million a year ago to $147.4 million, and with Ethereum (ETH 0.79%) staking coming up with The Merge, this revenue should increase. In the long term, it's this subscription and services segment that I think will drive more of the company's revenue. 

Behind the big loss

A $1.1 billion loss sounds terrible, but it's misleading. Rules that require mark-to-market accounting on assets have a big impact; stock-based compensation is dilutive, but it isn't a cash expense. And then there are foreign currency charges that are out of Coinbase's control. Here's a breakdown of these items: 

Item Amount
Reported net loss $1.1 billion
Non-cash crypto impairment $377 million
Non-cash venture impairments $69 million
Stock-based compensation $391 million
Net loss excluding non-cash items $246 million

Source: Calculations by the author with data from Coinbase earnings release. 

In addition to these non-cash items, there was a $103 million net foreign exchange loss. This was from a strong dollar and a weaker euro. 

When you pull out non-cash items and foreign exchange losses, the loss for Coinbase was $143 million. That's not nearly as bad as the $1.1 billion reported. 

Compare this to reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of negative $151 million, and these numbers seem about right. 

Survival is the name of the game

Why am I looking at real cash burn? Because we're in a crypto winter, and right now, the name of the game is survival. If Coinbase can make it to the other side, it has a lot of potential as a business in crypto and Web3. 

Coinbase had $6.2 billion in cash and equivalents on the balance sheet at the end of the quarter and a goal to have a negative adjusted EBITDA of less than $500 million this year. It looks like the company has plenty of cash to survive for a few years of crypto winter if needed. 

If crypto doesn't recover, neither will Coinbase. But if it does, the company should be well positioned with a strong product base and lots of operating leverage. If you're bullish on crypto, it's hard not to be bullish on Coinbase as well.