Shares of cryptocurrency brokerage firm Coinbase Global (NASDAQ:COIN) stock have plummeted an astonishing 75% year-to-date.

After that sort of decline, it might seem like COIN stock is an obvious buy here. Surely it has to bounce at some point, right?

While Coinbase may be due for a relief rally once the price of Bitcoin (CCC:BTC-USD) stabilizes, it will be a long time before the company gets back on track.

While Coinbase generated an immense amount of profits in 2021, it won’t in the near-term future.

Analysts project sizable losses for the firm in both 2022 and 2023. Here’s why Coinbase faces a prolonged slump.

A Closer Look at COIN Stock

Cryptocurrency is in the midst of another major meltdown, but it’s hard to shake the feeling that this time is worse than previous busts.

That’s particularly true since there is so much leverage embedded into the system now. During the 2017 boom, people were primarily just speculating on Bitcoin and Ethereum (CCC:ETH-USD) without much leverage.

This time around, however, there’s a ton of additional risk through all the crypto loans, staking arrangements, stablecoins, yield farms and so on.

Since the 2018 crypto bust, the asset class has changed. Many new speculators in the space were drawn to the promise of 15%, 20%, 30% or even higher annual yields.

That’s when they weren’t betting on speculative assets with seemingly little inherent value, such as NFTs.

Since Bitcoin doesn’t actually generate profits or cash flows itself, it can be hard to create these promised yields. People have turned to increasingly complicated and opaque financing structures to try to deliver steady income streams out of crypto.

Now that these arrangements are failing, however, it’s hard to deduce where the bottom may be. There’s now even a run on Tether, which is the largest and most important of the stablecoins.

If it were to fail, there’d be yet another massive leg down in the crypto space. As far as we know, Coinbase hasn’t taken too much balance sheet related to cryptocurrency prices directly.

However, trading volumes and fees will be down dramatically with Bitcoin at $20,000 let alone lower prices.

Trading Fees Will Plunge

The biggest issue facing COIN stock, as it relates to profits directly, is how it gets paid.

A standard transaction for a retail trader involves a fee of around 0.5% at Coinbase, though specifics can vary depending on a variety of factors. The standard 0.5% commission is quite lucrative for Coinbase.

Last year, when Bitcoin was at $60,000, it would cost $300 to buy a single Bitcoin at Coinbase.

Hypothetically, let’s say Bitcoin appreciated to $65,000 and the trader sold the coin to lock in profit. She’d pay $325 in another transaction fee to sell that coin at $65,000. That’s $625 going to Coinbase for a single set of buy and sell transactions on one Bitcoin.

With Bitcoin at just $20,000 now, we’re talking only $100 for each buy or sell transaction instead of $300 or more.

In addition, as the price plunges, trading volumes will die off. The longer the price languishes down here, the more retail traders will give up on crypto and try something else instead.

Coinbase’s Controversial Layoffs

Earlier in June, news broke that Coinbase had decided to rescind job offers it had made to future Coinbase employees.

Hundreds of people who had accepted jobs with Coinbase found out that they suddenly weren’t going to be working for the crypto firm after all.

This was a huge blow for people who had already moved, signed leases and so on to prepare for starting employment at Coinbase.

It was particularly brutal for some engineers who were relying on Coinbase’s employment to maintain their U.S. visa eligibility.

Shortly after the rescinded job offers, Coinbase laid off 18% of its existing workforce. The firings came so abruptly that employees were notified by personal e-mail addresses rather than their deactivated Coinbase ones.

These might be necessary moves to protect Coinbase’s business over the longer term, but the company risks causing serious reputational damage.

Assuming it makes it through this current crypto bust in one piece, attracting talent may be much more difficult for the company going forward.

COIN Stock Verdict

Maybe Coinbase will be able to get its business turned around eventually. Maybe, it won’t be able to.

The cryptocurrency ecosystem has sustained an incredible amount of damage over the past few months. The loss of things such as stablecoins, yield farming and NFT speculation as use cases for crypto has shaken cryptocurrency to the core.

Unfortunately, Coinbase has damaged its own reputation in trying to survive. It’s understandable why the company is rapidly having to shed people from its workforce, but this sort of sudden cost-cutting can irreparably damage a company’s culture.

Throw in the fact that Coinbase’s fees were unusually high compared to other brokerages during the cryptocurrency boom years, and it’s hard to see this company returning to profitability anytime soon.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.