Coinbase, the American cryptocurrency giant, is expected to reveal a loss of nearly $600 million in its fourth quarter report, marking its fourth consecutive quarter of declining revenue.
The Crypto Juggernaut Coinbase should to deal a blow to investors with its fourth quarter report, revealing a staggering loss of nearly $600 million. It would be its fourth straight quarter of declining revenue.
It comes as CEO Brian Armstrong is locked in an uphill battle with US regulators over the security of crypto custody, staking and stablecoins, creating a minefield of uncertainty that threatens to empty the coffers of the business.
Coinbase’s reliance on trading fees has been its Achilles’ heel, forcing the company to explore new sources of revenue in an effort to weather the regulatory storm.
Despite expectations of increased revenue in the first quarter, the crypto titan may need to cut costs given that it expects to lose no more than $500 million in adjusted pre-tax profits in 2022.
Nonetheless, Coinbase had a staggering $5 billion in cash and cash equivalents at the end of September, which should see it through the crypto winter.
Falling crypto prices pushed back many of Coinbase’s core customers, retail traders, resulting in the weakest sales since late 2020.
Additionally, growing regulatory headwinds have made analysts wary, with regulators stepping up scrutiny of digital assets since the collapse of rival exchange FTX in November. Federal agencies have accelerated crackdowns on crypto companies, products and services in recent weeks, which has heightened uncertainty.
Despite the regulatory uncertainty, Compass Point analyst Chase White is optimistic about the future of Coinbase. He told Barron that he sees the cryptocurrency exchange as well positioned to gain market share, especially among US retail investors when the crypto bull market returns.
On the other hand, JP Morgan analyst Kenneth B. Worthington is more cautious, citing regulation by enforcement as a risk for digital-focused companies. Although Coinbase has created more stable subscription service businesses that are resilient to crypto market volatility, recent SEC actions have put different coins at risk.