Analysts Warn of Declining Revenue for Coinbase Due to Lower Trading Volumes
Analysts predict a potential decline in Coinbase’s revenue for Q3, citing decreased trading activity and regulatory uncertainty ahead of the presidential election.
Wall Street analysts expect a significant downturn in spot trading volume for Coinbase (COIN) in the third quarter, attributed to a lack of market catalysts and an uncertain regulatory landscape leading up to the presidential election.
The exchange is set to announce its earnings after market hours on Wednesday, anticipating a revenue drop of approximately 13% from the previous quarter, amounting to $1.26 billion compared to $1.45 billion.
Analyst Benjamin Buddish from Barclays noted:
“Volumes continued to soften through the quarter and we shake out quite a bit below the Street, largely on weaker retail transaction revenues.”
Translation: Volumes have generally decreased throughout the quarter, leading to lower expectations than previous forecasts, primarily due to reduced revenues from retail transactions.
Notably, the reduction in trading volume reflects wider trends across the industry, with total crypto trading down from $3.92 trillion in the second quarter to about $3.3 trillion last quarter. Coinbase's key competitor, Robinhood, is also anticipated to report its third-quarter outcomes soon.
Data from The Block further indicates that Crypto.com has overtaken Coinbase as the most frequented crypto exchange in North America since July, primarily due to its extensive array of token offerings.
Experts are also attributing the downturn in trading volumes to the regulatory uncertainties linked to the upcoming presidential elections, with Oppenheimer noting an increase in trading volumes outside North America.
In parallel to trading revenue declines, J.P. Morgan's Kenneth Worthington projects lower earnings from Coinbase's staking services, significantly influenced by ether's performance, which has seen a drop of about 24% in the third quarter. Ether has fluctuated between $2,330 and $2,760, compared to much higher values earlier in the year.
Summarizing current market dynamics, analysis suggests that while Coinbase's share price has appreciated nearly 30% year-to-date, it still remains 21% lower than its earlier peak in March.
