Coinbase, the world's second-largest cryptocurrency exchange by volume, with a 24-hour trading volume of nearly $2B yesterday alone, is going through a lot of trouble due to SEC investigations into the company's operations and alleged insider trading. Since the beginning of the year, its stock has fallen as much as 65%, likely due to a drop in trading volume, investor pessimism, historic declines in token prices, and mentioned investigations.
"Q2 was a test of durability for crypto companies and a complex quarter overall. Dramatic market movements shifted user behaviour and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program," Coinbase said.
COIN reported $217 billion in sales for the quarter, losing nearly $100 billion compared to Q1 2022 ($309 billion). Revenue also fell to 803 million against Wall Street's forecast of $873.8 million from more than $2 billion a year ago. The drop in stock prices was not saved by a beat in earnings per share (EPS) expectations, which came in at -$0.87 vs. the expected -$1.23.
The stock market's shares buckled, falling 10.5% during yesterday's session. Coinbase's results may have confirmed concerns about the current situation of crypto companies and how the crash contributed to the loss of project revenues and lowered expectations for growth.
The situation was commented on by Morningstar equity analyst Michael Miller, who said in an interview with Reuters: "Coinbase has not seen a mass migration from its platform [...], its users are becoming more passive in investing in cryptocurrencies." There seems to be a lot of truth in this. Investors with significant unrealized losses tend to be more willing to wait out a difficult period and limit their activity, while new buyers are likely to be among those who have been waiting for token prices to fall for a long time and have a long-term investment perspective, so they don't trade as actively.
It's hard to determine how much of an impact Coinbase's poor performance had on the cryptocurrency market. That's because it coincided with a local correction. What we do know, however, is that the listings of tokens such as BNB (owned by the Binance exchange) and KCS (KuCoin exchange) saw the biggest declines and daily minimums after the COIN results were announced.
Currently, Coinbase seems to be distancing itself from competitors such as FTX, Binance, Kraken and KuCoin, which are maintaining a higher growth rate along with a high level of service. Binance alone dwarfs the rest with nearly 21 million visits in the last week and more trading volume than the top 5 competitors in this category combined.
Today, the broad crypto market is seeing slight declines. Bitcoin and Ethereum at 12:00 GMT+3 are losing 0.5% and 0.05% respectively, developing a local consolidation. ZCash, which was designed on the basis of Bitcoin, is falling the hardest. It has had several technological solutions added to it, notably affecting a higher level of security and anonymity of transactions. The token has developed strong momentum in recent days, gaining about 18% on the Conotoxia MT5 platform since the beginning of August, followed by a correction today, with (12:00 GMT+3 ) ZCash falling about 8%.
Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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