Coinbase trading volumes are falling as a ‘Crypto Winter’ comes in

Coinbase
TL;DR Breakdown
  • There is a sharp drop (44%) in crypto trading volume at Coinbase.
  • Coinbase is keen on diversifying investments.
  • Coinbase remains a respectable entity and commands respect on Wall Street despite a slow quarter.

Coinbase has endured a grueling quarter as crypto prices and trading volumes have fallen. This has only strengthened the negative narrative on a stock that has already fallen by 71% for the year.

Coinbase’s share price has dropped significantly since the end of the trading day. Currently, the stock is trading as if the firm will go bankrupt, according to BTIG analyst Mark Palmer. In pre-market trading on Wednesday, Coinbase stock dropped more than 14%. This stock’s ticker is now the most popular.

According to Coinbase’s quarterly release, the company’s revenues missed expectations by $300 million. Besides, monthly transacting customers fell by 19.2%, and trading volumes fell by 44%.

However, those disclosures should not have been surprising to people keen on trends. There has been a downtrend in the prices of digital assets over the past few weeks. Thus, it is not surprising to experience a 16% decline in the stock.

Coinbase faces questions of viability

This year, Coinbase indicated that it aims to reduce its adjusted operating losses to $500 million. The vast losses are a constant concern about the company’s long-term viability.

CEO Brian Armstrong took to Twitter to address investor concerns following the earnings call. He talked about the company’s long-term viability due to the potential long-term fall of the crypto market.

We published a disclosure in our 10Q today on managing crypto assets,

Armstrong added.

Coinbase will ever be a safe location to invest your coins, and it will remain so for the foreseeable. We are not in danger of becoming bankrupt. However, we have added a new risk factor based on a new disclosure obligation for public firms that store crypto assets for other parties, dubbed SAB 121.

Coinbase is seen mainly as a positive company despite a sluggish quarter by Wall Street. This week, on Yahoo Finance Live, MoffettNathanson analyst Lisa Ellis said,

The enterprise is ready to diversify its investment. We have chosen to diversify the volatile trading business during the impending crypto market downturn in favor of a more stable investment strategy. For both the company’s stability and its stock and its long-term diversification, we believe this is vital.

BTIG’s Palmer claimed that concerns about the company’s insolvency are far-fetched. Moreover, he feels that many catalysts are taking shape. We are alert regarding the potential impact of a severe Federal Reserve tightening cycle.

How does Coinbase’s future look?

As clear-eyed as we are regarding the potential impact of a severe Federal Reserve tightening cycle, we feel the market is factoring in an outcome for COIN that fails to represent the firm’s significant liquidity position. It includes $6.1 billion in revenue and $1bn of crypto held for expansion. The cash solely equals over one-third of the stock market valuation at today’s time.

Coinbase is thinking about the condition of the general sector. The company stated in its shareholder letter that more investment was critical. Thus, it’s more crucial than ever for the firm to continue investing throughout the three central pillars. The pillars include Crypto as an investment, Crypto as a new economic institution, and Crypto as an app platform. Then there’s a plot to track market conditions to ensure that they invest their resources as carefully and wisely as possible.

Coinbase made efforts last year to strengthen its financial sheet. Thus, the short term may be bumpy. They intend to invest sensibly to produce long-term shareholder value.”

Coinbase is one of the most dominant trading platforms for digital assets. Despite the downtrend, most users are optimistic that it will bounce back. The strategies they adopt will see them through the turbulence to emerge stronger.

Nellius Irene

Nellius Irene

Nellius Irene is a cryptocurrency investor and journalist who has been in the nascent space since 2018. She has researched and written on several crypto-related topics including non-fungible tokens (NFTs), decentralized finance (DeFi), fundraising, mining, etc. Her major focus is covering regulatory events that are capable of shaping the entire crypto ecosystem.

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