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Investors will be interested in anything Coinbase reveals about recent regulatory scrutiny.
Dreamstime
Coin base
Global is expected to show a sharp drop in revenue and earnings when it reports second-quarter results after the close on Tuesday, as investors get their first chance to see how much damage the crypto market crash did to the trading platform.
Wall Street expects Coinbase (ticker: COIN) to report revenue of $874 million, down 25% from the first quarter. Analysts also see the company’s quarterly loss increasing to $2.47 per share from $1.98 the previous quarter.
The second quarter was one of the most turbulent periods in the history of the emerging industry. In May, a popular stablecoin failed, leading to falling crypto prices and the bankruptcy of several crypto lenders and investment firms. Bitcoin’s price in June fell below $20,000, marking a loss of more than 70% from its November high. It has since recovered to around $23,000.
Coinbase stock has similarly struggled. Since the start of the year, the company’s shares have lost 63% of their value to around $92. The “crypto winter” – a term used by industry followers to describe bear markets – is a double whammy for the trading platform. Not only do lower prices for coins such as
Bitcoin
and
Ether
reduce transaction revenue, they could put a stop to the rapid increase in crypto adoption by new users, which has seen other recent entrants experience drastic losses.
Although cryptocurrency prices appear to have stabilized, trading volumes on Coinbase have remained low and barely above July levels, said
Mizuho
CEO Dan Dolev in a research note last week. In March, Coinbase saw an average daily trading volume of around $3 billion, compared to $1.7 billion in July and between $1.7 and $1.8 billion on August 3. Mizuho has a neutral rating on the stock with a price target of $42.
There hasn’t been bad news for Coinbase lately. The stock last week rose more than 50%. Some analysts believed the dramatic rise was the result of a “short squeeze”, where investors who had bet the stock would fall had to quickly close their positions and buy shares to avoid further losses. Coinbase and BlackRock (BLK) last week also announced a partnership that would allow BlackRock’s institutional clients to trade through the platform.
Investors will also likely be interested in anything Coinbase reveals about recent regulatory scrutiny. In July, the Securities and Exchange Commission brought an insider trading case alleging that seven assets on Coinbase’s platform are securities, which the company disputes. The distinction is important for firms like Coinbase, which could be subject to increased registration requirements and penalties if they were one day found to be allowing trading in unregistered securities.
Regulators generally accept that Bitcoin, the most valuable and most traded crypto, is not a security, but Coinbase and other platforms have recently derived a growing share of their revenue from trading in so-called altcoins that may fall under that umbrella. In the first quarter, for example, Coinbase said 52% of its transaction revenue came from cryptoassets other than Bitcoin and Ethereum, up from 40% in the first quarter of 2021.
Write to Joe Light at [email protected]
