Coinbase retail participation tumbled 68% in the second quarter this year, Germany-based cryptocurrency research and news firm CryptoMonday.de analysis shows.
The cryptocurrency exchange has had a tumultuous year as major digital assets, including Bitcoin and Ethereum, fell more than 50%. COIN stock plummeted nearly 72% in 2022 and Coinbase laid off 18% of its staff in June, equating to about 1,100 jobs.
"The data paints a picture of an industry in crisis. Clearly, the current prices are not sustainable and something will have to change soon," said CryptoMonday CEO Jonathan Merry. "If the market starts to turn around, we could see Coinbase's retail participation grow again. However, if the industry continues to decline, it is likely that Coinbase will continue to see a drop in retail participation."
Coinbase saw major losses as its retail user numbers dwindled. The company posted a $1.1 billion loss as revenue fell 31% to $803 million.
Bull Case For Coinbase
But some analysts think Coinbase could see a boost from rising interest rates. On Friday, DA Davidson cut its EBITDA — earnings before interest, taxes, depreciation and amortization — estimates for Coinbase by $40 million to $351.7 million for fiscal 2023.
In a research note, analyst Christopher Brendler said COIN stock has been pressured by volume declines and "misplaced fears of fee compression." But, he's turning "increasingly bullish" as the successful Ethereum merge "cements the company's market-leading staking opportunity." And he expects interest rate income to "blow away" consensus estimates thanks to interest rate hikes and its stablecoin joint venture with Circle. Brendler maintained his $100 price target and Buy rating for COIN stock.
In mid-September, JPMorgan analyst Kenneth Worthington also noted that Coinbase has a "substantial revenue opportunity" from rising interest rates. The revenue opportunity for Coinbase is more substantial than other financial institutions, due to "unique investments and idiosyncrasies with crypto accounts," he wrote. Coinbase could keep nearly all of its interest income, unlike some of its other peers that pass it on to clients, Worthington predicted.
The biggest interest opportunity may stem from the stablecoin venture with Circle, which oversees the USDC stablecoin. Worthington estimates it could represent a $700 million opportunity of the potential $1.2 billion interest income revenue for Coinabse in 2023.
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