Credit ratings agency Moody’s has downgraded the Corporate Family Rating (CFR) and guaranteed senior unsecured notes of crypto exchange Coinbase, stating that both ratings have been placed under review for further downgrade.

The CFR, a rating assigned to reflect Moody’s opinion of a company’s ability to honor its financial obligations, was downgraded from Ba2 to Ba3, which is considered below non-investment grade.

Senior unsecured notes are a type of debt a company holds that is not backed by any assets and, in the event of bankruptcy, must be repaid before any others. Moody’s downgraded Coinbase from Ba1 to Ba2.

Earlier in May, Cointelegraph reported Coinbase’s junk bonds tanked in response to an underwhelming first quarter, and since the report, the bonds have continued to fall a further 9.5%.

In its rationale for the downgrades, Moody’s highlighted that Coinbase’s revenue model “is tied to trading volumes, transaction activity per user and overall crypto asset prices.” It said the steep price decline in crypto over the past months has caused customer trading activity to wane, which in turn caused weaker revenue and cash flow for the company.

The uncertain environment forced Coinbase to lay off about 18% of its staff on June 14. But, even with this measure, Moody’s said it expects Coinbase’s profitability to “remain challenged in the current environment.”

Competition for customers has also been heating up in the United States after Binance.US began offering zero-fees spot trading for Bitcoin (BTC). The offer follows in the footsteps of trading platform Robinhood, which pioneered no-commission crypto-trading in 2018.

In a bid to attract users to the platform, on Thursday, Coinbase added five new Ether (ETH) ERC-20 tokens plus the ability for users to send and receive some assets on the Polygon network along with USD Coin (USDC) on Solana.

Related: Coinbase to shut down Coinbase Pro to merge trading services

Moody’s said it could call for further downgrades should crypto prices continue to fall and if trading volumes on the exchange remain the same or fall further. It will also look at whether the firm can reduce expenses, and its ability to maintain talent as well as potential “crypto asset regulatory developments.”

The ratings agency added that Coinbase’s ratings could be upgraded again in the future if it can generate a profit even during a bear market and diversifies its revenue through other streams not associated with trading and cryptocurrency prices, noting that crypto transaction-based revenue represented 87% of Coinbase’s net revenue in Q1 2022. 

Coinbase’s shares were up 13.4% to close at $58.88 on Thursday but fell just over 1% in after-hours trading. Year to date, its shares are down nearly 77%.