Crypto Exchange Coinbase Losses Expected To Be Smaller, Analysts Seek Details On International Exchange

Traders of US-based crypto exchange Coinbase (COIN) are likely to get some relief when the company reports first-quarter 2023 earnings on Thursday.

Coinbase is expected to show a slight increase of about 8% in revenue compared to the previous quarter, according to forecasts from FactSet. In January, the exchange reported revenues of 605 million dollars in the 4th quarter of 2022 and estimates for this quarter are 655 million dollars.

The earnings report is also likely to show a quarterly loss of $1.45 per share, and trading volume for the period ending March 31 is estimated at $148 million, up from $146 in Q4, FactSet projects.

“We estimate first quarter volume to remain nearly flat quarter over quarter, which would be the first quarter since the crypto boom ended that Coinbase’s quarterly volume did not decline,” Needham senior analyst John Todaro wrote in a report. “This gives us optimism that retail volume could have bottomed out.”

Needham lowered its 2023 revenue estimates slightly to $3.44 billion from $3.66, citing “a slower recovery than initially projected” and disappointment in volume, which “has not risen proportionately with crypto prices,” the report said.

Cryptocurrencies across the board have benefited from a new wave of risk-off sentiment since the recent banking crisis, with distrust of traditional finance sparking renewed interest in digital assets. Bitcoin (BTC) broke above $30,000 on April 10 for the first time since June 10, 2022. It recently traded at $28,600, up 74% year-to-date.

Investors have been particularly interested in Coinbase’s recent unveiling of its derivatives exchange in Bermuda, which is part of the company’s expansion outside of the US, as it could have a positive impact on fee revenue. The initiative comes as regulators crack down on crypto companies in the country.

“The non-US crypto derivatives market is significantly larger than the spot trading market, and although Coinbase’s offshore operations are smaller than its US operations, we believe the upside is potentially meaningful,” Barclays analysts wrote in a note.

They added: “Our checks indicate that crypto activity outside the US tends to skew more heavily towards retail users, which would support the overall fee rate earned on these contracts.”

Coinbase’s international exchange will allow traders to bet on the price of bitcoin and ether via perpetual futures contracts with up to five times leverage, a popular form of derivatives trading that is illegal in the US due to its high risk.

“Perpetual futures trading accounts for about 75% of global trading volume,” Owen Lau, senior analyst at Oppenheimer, told CoinDesk TV. “If they can expand that and take some market share, it will be incremental.”