Coinbase is expected to report a huge drop in its revenue in the last quarter of 2022 as transactions plummet and crypto prices plummet to record lows.
Coinbase is set to report results for the latest quarter of 2022 after the market closes on Tuesday. wall street analysts expect Compared to the same quarter in 2021, the exchange’s revenue fell by more than 75% to $588.6 million.
In addition, Coinbase is projected to post a loss of $568.1 million in the fourth quarter. In comparison, the exchange reported net income of $840 million in the fourth quarter of 2021 and $177 million in profit for 2020.
The platform is predicted to bring in a total of $235.4 million from subscriptions and services, which is about 40% of its total revenue. In the same quarter of 2021, less than 10% of the company’s total revenue came from these business lines.
Similarly, Coinbase’s total assets are expected to be $88.8 billion, the lowest amount in more than two years. The decline has been largely attributed to eroding user confidence in centralized crypto platforms, along with a drop in crypto prices following an unprecedented decline. The Fall of FTXOnce the third largest exchange in the world.
Analysts at JP Morgan and investment banking firm DA Davidson have downgraded Coinbase stock bye to neutralArguing that regulatory pressure is “just getting started.”
It comes in the form of S&P Global, one of the largest credit rating providers in the past. downgrade The crypto exchange’s debt has been upgraded from a status “BBB” to “BB-,” moving it from “investment grade” to “speculative grade” earlier this year.
Chris Brendler, an analyst at DA Davidson, claimed that while Coinbase could benefit from a clearer regulatory framework, the exchange faces a rocky road in the short term. He reportedly said in Thursday’s note:
“While we still agree to [Coinbase] improved management approach [regulatory] Should clarity and a level playing field ultimately prove to be good for both Coinbase and the sector, the near-term path looks increasingly treacherous.
Coinbase shares also rallied to start 2023 amid a rally in crypto prices. The company’s stock is up 82.55% year-to-date. However, over the past year, the stock has lost nearly two-thirds of its value.
How the regulatory clampdown could affect Coinbase’s revenue streams
Coin custody, stablecoins, and staking are the three key businesses Coinbase is counting on to help jump-start its growth, according to Bloomberg. reports, However, all these sectors have come under regulatory scrutiny of late.
Last week, SEC Signed an agreement with crypto exchange Kraken Stop offering staking services or programs to customers in the country and pay $30 million to settle allegations that it “failed to register the offering and sale of its cryptoasset staking-as-a-service program”, which the commission qualified as securities.
Following the move, Coinbase CEO Brian Armstrong Said The exchange’s crypto-staking services are not securities, adding that it is prepared to defend it in court. This should not come as a surprise as the exchange derives around 3% of its total revenue from staking fees.
Coinbase also receives revenue from the stablecoin USDC. However, with SEC clamping down On Paxos, the crypto firm that issued Binance’s stablecoin Binance USD (BUSD), Coinbase’s USDC may also run into trouble.
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