Wall Street is predicting a more than 50% drop in revenue from a year ago and expects Coinbase to report a loss of around $585 million. The company delivered a profit of 1.6 billion dollars in the second quarter of 2021.
Still, some investors hope the worst may soon be over. Shares of Coinbase have risen more than 30% in the past five trading days.
The rally is partly due to the recent rise in crypto prices. Ethereum, for one, has risen more than 8% in the past week. But there’s another big reason for Coinbase’s comeback.
A partnership with the Wall Street giant and iShares owner Black stone (BLK)which had about $10 trillion in assets under management at the end of last year — before 2022’s big drop in stocks and cryptos — could also help boost investor sentiment for Coinbase.
Coinbase executives Brett Tejpaul and Greg Tusar said in an Aug. 4 blog post that the partnership will allow BlackRock’s institutional investors to trade bitcoin through the platform’s Coinbase Prime service.
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to effectively manage the operational lifecycle of these assets,” Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships, said in the blog post.
Coinbase executives hailed the news as “an exciting milestone” for the trading platform, adding that “we are honored to partner with an industry leader and look forward to furthering Coinbase’s goal of providing greater access and transparency to crypto.”
Despite this year’s drop in crypto prices, many large financial firms still believe they need an active presence in the bitcoin market. So the partnership with BlackRock, the world’s largest asset manager, provides some much-needed validation for Coinbase.
But it may be too early to say that the worst is over for the company. Crypto prices continue to fluctuate wildly, and that will continue to hurt Coinbase’s revenue.
In June, the company announced plans to lay off nearly 20% of its employees, with CEO Brian Armstrong warning of a looming recession and the possibility of a “crypto winter” that could “last for an extended period of time.”
There are other concerns as well. The Securities and Exchange Commission is looking into whether Coinbase illegally allows customers to trade some unregistered cryptocurrencies on its platform. Coinbase has flatly denied this. The SEC also recently charged a former Coinbase product manager with insider trading.
And one of Coinbase’s biggest bulls has also become skeptical. Tech equity guru Cathie Wood of Ark Invest recently trimmed Ark’s stake in Coinbase in several of the firm’s ETFs.
