Coinbase earnings and a possible Crypto recovery

[MongiIG]

Can the embattled cryptocurrency exchange platform expect a turnaround?

Source: Bloomberg

 

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Hebe Chen | Market Analyst, Melbourne | Publication date: Wednesday 02 November 2022 

When will Coinbase report its Q3 earnings?

Coinbase will publish its third quarter financial results on Thursday, 3 November after the market close.

What to expect?

• EPS forecast: -$2.23. The reported EPS for the same quarter last year was $1.62.
• Revenue: 646.73 million, 25% down from the previous quarter and a 59% decline from Q3, 2021.

What to watch?

• Monthly Transacting Users (MTU)

The sharp decline in crypto value significantly impacted investors appetite for high-risk digital coins, resulting in the market shrinking with fewer market participants.

Coinbase’s MTU was reduced by 20% from the beginning of the year. While the downtrend seemly slowed down towards the end of Q2, investors are keen to know whether users continued to move away from the platform as any rebound could be viewed as a early sign of recovery.

Source: Coinbase

• Revenue and new partnership

According to the Q2 earnings, net revenue declined 35% compared to Q1, primarily due to the sharp fall in retail transaction revenue. Learning from this, Coinbase made a move to partner with Blackrock with the hope that the world’s largest asset manager could help to generate a new source of revenue from the market.

From the impending Q3 report, investors should get a glimpse of whether the newly-formed partnership is working.

• Crypto landscape

Coinbase has suffered profoundly and is down nearly 80% from its 2021 IPO. It isn’t the first time crypto assets have gone through such a dramatic correction.

Since 2010, the crypto economy has experienced four major price cycles, with each prior cycle losing 70 to 90% of the total market value. However, the downtrend is often followed with a new cycle, bringing in additional market participants and a growing crypto landscape.

The key questions at the moment are: when will the next cycle start? And will Coinbase be able to preserve its market leadership by then?

Source: Coinbase

Technical analysis

From a technical point of view, the price for Coinbase retreated this week, returning to trade below the 20 and 100-day SMA after breaking above it last week. More importantly, the price action is now forming a double top shape which could suggest a further downtrend from the level of $63.

Further losses below this would likely meet the near-term support at $60. Only a reversal above $70 would likely signal an additional pushback to the high of October.

Source: IG

[Naoto]

As a result of the precipitous drop in crypto prices, fewer people are willing to trade in high-risk digital coins. Since the beginning of 2018, Coinbase's MTU has been cut by 20%. Investors are curious about whether users continued to move away from the platform despite the slowdown in the downtrend towards the end of Q2 since any rebound could be seen as an early sign of recovery. The earnings report for the second quarter shows that the company's net revenue dropped 35% from Q1 levels, primarily due to a precipitous drop in retail transaction revenue. Anyway, to distress from all the crypto stuff, you can just bet on the World Cup and check on odds brasil copa do mundo.