Analysts Project Coinbase Revenue to Fall 75% in the Last Quarter
Coinbase will report a sharp decline in revenue for its last quarter 2022 due to a drop in transactions and a plunge in crypto prices.
After the market closes on Tuesday, Coinbase will report its latest quarter 2022 results. Wall Street analysts Expect The exchange’s revenue will drop by more than 75% when compared to the same quarter of 2021 and reach $588.6 millions.
Coinbase will also report a loss of $568.1million for the fourth quarter. Comparatively, Coinbase reported a net profit of $177 million for 2020 and a net income in 2021 of $840 millions in the fourth quarter.
Subscriptions and services will account for approximately 40% of the platform’s total revenue. These business lines accounted for less than 10% of company revenue in the same quarter 2021.
Coinbase’s total assets will be $88.8 Billion, which is the lowest figure in over two years. This decline can be attributed to dwindling cryptocurrency prices and the increase in trust among users in centralized crypto platforms after the collapse of FTX (once the third largest exchange in the world).
Analysts from JPMorgan Securities and D.A. Davidson, an investment bank company, has downgraded Coinbase stock From Neutral to BuyArgumenting that regulatory pressure is only just getting started
This is because S&P Global was previously one of the most important credit rating providers. Downgraded The crypto exchange’s one position in the debt column was changed from “BBB” (to “BB-“), thereby moving it from “investment quality” to “speculative grades” earlier this year.
Chris Brendler is an analyst at D.A. Davidson claimed that Coinbase would benefit from a clear regulatory framework but is currently facing a difficult road. According to reports, Davidson stated in a Thursday note that:
“While we are still in agreement with [Coinbase] Management believes that the situation has improved [regulatory] Clearness and fairness should eventually prove to be a good thing, for Coinbase and the entire sector. However, the near-term path seems increasingly difficult.
Coinbase shares rose in early 2023 amid a rebound of crypto prices. The stock has risen 82.55% over the past year. The stock has seen a loss of around two-thirds over the past year.
How Coinbase’s Revenue Sources Could Be Impacted by Regulatory Clampdown
Coin custody, stablecoins and staking are the three core businesses Coinbase relies on to jump-start its growth. According to a Bloomberg report Report. All these sectors are now under scrutiny from regulators.
The SEC and crypto exchange Kraken reached an agreement last week to cease offering staking programs or services to clients in the United States and to pay $30 million to resolve allegations that they failed to “register the offer and sale” of cryptoasset-staking-as a service program, which was deemed securities by the commission.
Coinbase CEO Brian Armstrong stated that the crypto-staking services provided by Coinbase are not securities and that he was willing to defend the position in court. It shouldn’t be surprising, considering that the exchange gets about 3% of its total revenues from staking fees.
Coinbase also earns revenue from stablecoin USDC. Coinbase’s USDC could also be at risk due to the SEC’s clampdown on Paxos (the crypto firm that issues Binance’s stablecoin Binance USD) (BUSD).