The landscape appeared different during the 2018 crypto winter, with no publicly traded crypto exchanges and few NFTs. Moreover, meme coins were yet to take off. Now, cryptocurrencies have transformed, and you will find a business model depending on the crypto economy’s health.
Coinbase (COIN) is a leading crypto exchange in the US. It attracted global investors due to its technology, simplifying most complexities associated with investing in crypto. The company enjoyed enormous growth last year following Nasdaq’s IPO and crypto market bull cycle.
Coinbase had its users hitting 89 million ATH, rising from 43 million within a year, while BTC and most cryptos recorded new record peaks.
Winter Is Here
Meanwhile, the crypto market started cooling as 2021 ended. Coinbase struggled in 2022 amid escalated crypto crashes as the trading company relies on the bullish market. Coinbase dominated headlines in mid-June when it declared an 18% worker layoff to reduce costs. Moreover, the exchange will freeze planned new hiring.
Brian Armstrong, Coinbase’s CEO, revealed multiple factors behind the move, including potential recession, over-allocation of cash during the 2021 bullish markets, and past over-hiring. Its Q1 earnings show revenue declined by 27% from the past year. Monthly trading volume noted an approximately 44% slump. Also, the active monthly customer metric saw another blow, plunging to 9.2 million from 11.4 million users.
Expert View
COIN stock wasn’t an exception. It lost over 30% within the past month. Moreover, analysts added fuel to the downside fire, with monetary companies such as Goldman Sachs and Moody’s downgrading the stock.
Moody’s latest downgrade highlighted various factors to back Coinbase’s dismal outlook. For instance, the blow for fees. Moody’s stated that Coinbase makes more revenue amid high crypto prices and users executing increased trades. The revenue remained inhibited since the crypto space launched tumbles. Moody’s plans for further COIN downgrade as crypto prices deteriorate.
Goldman Sachs’ analysts had a similar outlook as far as Coinbase’s future is concerned. Goldman Sachs trusts Coinbase will encounter challenges generating revenue amidst lower crypto prices. It believes more impending layoffs to evade costs. Moreover, Goldman Sachs sees Coinbase’s Y/Y revenue slumping by over 60% without the job cuts. COIN stock will continue suffering under prevailing market conditions.
Editorial credit: Dennis Diatel / Shutterstock.com
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