Coinbase Results Remain Pressured by Crypto Chill

Coinbase has seen a dramatic decline in activity since last year, and analysts expect trading volume to show a renewed drop when the company reports third-quarter results this afternoon.

“TRansomware revenue, which accounts for 76% or more of sales, likely fell to $517 million for the third quarter from $655 million last quarter, and is 71% lower than in October 2021, said Javier Paz, director of data and analytics for Forbes Digital Assets.

Coinbase’sCOIN
other meaningful sources of income come from blockchain rewards and custodian fees. IInstitutional investors seem to get a sweetheart deal that their retail counterparts don’t, even though the latter is a much bigger part of their business.

“Retail traders generate only 32% of volume and 95% of trading revenue, while institutional traders account for 68% of trading and only 5% of revenue,” says Paz. Private customers are far more profitable due to higher fees. “Coinbase retail investors now pay the equivalent of 131 basis points while institutional traders pay 2.1 basis points.”

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However, Coinbase has more active users – 102 million – than any other crypto exchange, and this large retail base protects the company from the worst effects of the ravaged sector. “What retail traders get,” adds Paz, “is the confidence to deal with a large company that is the closest the crypto space comes to too big to fail.”

Still, competition has intensified as rival exchanges such as Binance and FTX also appear to be weathering the cryptocurrency storm. On the other hand, some smaller rivals could run out of money before trading volume picks up, potentially a “huge advantage” for Coinbase, Paz says.

Cryptocurrency prices have traded flat in recent weeks, but the market’s $1 trillion valuation is down from its $2 trillion valuation at the start of the year. BitcoinBTC
the largest crypto, is trading around $20,000, down from $50,000 early in the year, while runnerup ether is in the $1,500 range, compared to $3,700 in January.

Coinbase Q3 sales are expected to fall to $641 million from $1.3 billion a year earlier, with a net loss of $527 million versus a profit of $406.1 million last year, according to a consensus of analysts’ forecasts compiled by Factset. On an adjusted basis used by Wall Street, the firm’s loss per share is estimated to be 86 cents.