By Helene Braun
Wall Street analysts expect a further slowdown in spot trading volume for Coinbase (COIN) in the third quarter, partly triggered by a lack of catalysts for crypto and an uncertain regulatory environment heading into the presidential election.
The crypto exchange led by Brian Armstrong (pictured), when it reports its earnings after the stock market closes Wednesday, is expected to show a revenue decline of about 13% in the third quarter, to $1.26 billion from $1.45 billion in the previous quarter, according to estimates on FactSet. Meanwhile, the earnings per share (EPS) are forecasted to be $0.46, up from $0.14 in the second quarter.
“Volumes continued to soften through the quarter and we shake out quite a bit below the Street, largely on weaker retail transaction revenues,” Barclays analyst Benjamin Buddish wrote in a note to clients. He has an "equal weight" rating on the stock and raised his price target to $175 from $169 while cutting the EPS estimate to $1.05 from $1.62 in the third quarter.
The third-quarter slowdown in trading volume is not Coinbase-specific but an industry-wide phenomenon. Data from The Block shows that roughly $3.3 trillion was traded on all crypto exchanges, compared to $3.92 trillion in the second quarter. Coinbase competitor Robinhood (HOOD) is also set to report third quarter earnings after the stock market closes on Wednesday.
Additionally, data revealed that crypto exchange Crypto.com has been the most popular trading venue for investors in the North American region since July when it overtook Coinbase as the exchange with the highest trading volume. One of the reasons why Coinbase might have fallen short in volume is due to Crypto.com’s listing a wider range of tokens.
Analysts also believe that regulatory uncertainty due to the upcoming presidential election was one of the main drivers behind lower trading volumes on U.S. exchanges. According to Oppenheimer, the spot volume outside of North America increased 61% from the previous quarter. “We believe lack of catalysts and US election overhang have negatively impacted bitcoin,” Oppenheimer analyst Owen Lau wrote. “International volume was a bright spot.”
In addition to lower revenue from trading fees, which continues to be Coinbase’s main stream of income, J.P. Morgan’s Kenneth Worthington expects lower revenue from the exchange’s staking services. This is largely driven by ether (ETH) underperforming in the third quarter, down roughly 24% from Q2, according to the bank.
“Ether [has] particularly underperformed [during the quarter] despite seeing the launch of its spot ether ETPs intra-quarter,” Worthington wrote. “We see this market cap contraction particularly weighing on Coinbase’s staking revenue in 3Q and subscriptions and services revenue overall.
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