Crypto Crash Dims Coinbase’s Q1 Expectations

Top U.S. cryptocurrency exchange Coinbase Global Inc. reports its Q1 results on Tuesday (May 10), and expectations are low for the most important earnings report in crypto.

In February, Coinbase knocked Q4 earnings out of the park but warned that it expected trading numbers, and thus revenue, to fall in Q1. After a quick spike, its price fell 9%.

Despite seeing its price collapse from above $250 at the start of the year to $88 as of 11:30 a.m. on Monday (May 9), it dropped about 25% in just the past five days, which certainly clarifies what the market is expecting. The market has priced in weak results, which could provide a buffer of sorts.

And crypto is in much the same state, with bitcoin slumping below $33,000 for a new 2022 low.

On the other hand, bitcoin doesn’t dominate crypto trading nearly to the extent it used to; both ether and a growing number of other cryptocurrencies — altcoins — are a far bigger part of the market than they had been.

Looking on the Not-So-Bright Side

Still, a number of analysts are predicting bad news.

Last week, Mizuho Securities analyst Dan Dolev warned that analysts’ estimates for price targets and forecasts don’t factor in a steep drop in April and May trading volume. That will likely mean another poor outlook report for the second quarter, Barron’s noted last week, adding that the market has not priced in a forthcoming crypto winter — the industry term for a long bear market.

And John Todaro, an equity research analyst with investment bank Needham & Co., said in a client note that the dropping price of crypto isn’t as big a problem as the relative price stability on a day-to-day basis, according to Coindesk.

“Despite the downturn in crypto activity, [the first quarter] was marked by few sudden price swings which can lead to higher volumes on increased volatility,” Todaro wrote. “The period was instead marked by a steady, continuing decline with periods of range-bound markets leading to relatively muted volumes.”

There are other likely drags, among them a very weak launch to Coinbase’s much-hyped NFT marketplace, which saw underwhelming volume and some negative reviews of the site as a whole.

Read more: Coinbase Sees Slow Uptake for NFT Marketplace Test

The consensus estimate by Coinbase analysts for the first quarter is $1.5 billion in revenues, with an adjusted earnings loss of $0.01 per share.

So, one key for Coinbase will be the extent to which its predictions of declining monthly transacting users (MTUs) came true in a quarter in which a comparatively price-stable crypto market with fewer peaks and valleys does it no favors

Yet the Wall Street Journal shows that the number of analysts calling COIN a buy has increased slightly this year. And Cathy Wood’s Ark Investment Management recently bought up Coinbase, adding another $7.2 million to its investment, calling the price collapse a buying opportunity and reminding that she’s got a five-year outlook.

And a number of analysts feel that trading volumes isn’t the only stat that provides a good long-term view of the crypto market.

“The future for this innovative company is materially broader and wider than just the leading digital asset and its associated trading volumes,” Canaccord Genuity analyst Joe Vafi wrote in a client note near the end of April, CoinDesk noted.

But for the short term, a weak Q1, possibly a weaker-than-expected Q1, is a real possibility.