Coinbase stock price analysis: buy or sell ahead of earnings?

Coinbase (COIN) stock price has dropped for seven straight days and it could get worse when it publishes its quarterly results on Thursday. The stock retreated to a low of $224.35 on Wednesday, down by over 17% from its highest point on July 23rd.

Cryptocurrency prices are falling

Coinbase share price will be in the spotlight as cryptocurrency prices slump. Bitcoin price dropped from this week’s high of $70,000 to below $64,000. Ethereum also moved below $3,200 while the total market cap of all coins tumbled to $2.29 trillion.

Coinbase stock has a close correlation with Bitcoin and other altcoins. Lower prices lead to lower volume and transaction volume for companies like Coinbase and Binance.

Indeed, recent data shows that the volume of coins traded in decentralized and centralized exchanges has been in a steep downward trend. According to DeFi Llama, the volume traded in DEX platforms in July stood at over $161 billion, higher than June’s $157 billion.

This volume peaked at over $266 billion in March as Bitcoin rose to a record high. Estimates are that the volume in the Centralized Exchanges (CEX) has also retreated.

DEX volumes

Coinbase earnings ahead

The next important catalyst for the Coinbase stock price will be its financial results scheduled for Thursday.

These will be important numbers for two main reasons. First, they will be the first full quarter results after the approval of spot Bitcoin ETFs. In Q2, these ETFs continued adding assets, with the iShares Bitcoin Trust (IBIT) having the most of them.

Coinbase has become an important player in the ETF space since it is the main custodian of companies like Blackrock and Grayscale. As such, the company has seen inflows worth over $15 billion this year. These results will provide more information about how the business is doing.

In the first quarter, the company saw its assets under custody jump by 69% to $171 billion while custody fees soared to $32 million. The ETFs also led to more Prime finance revenue during the quarter.

Coinbase’s custody business will not be a big part of the company’s revenue. However, it is a simple business that will give it constant and high-margin revenues for a long time.

Coinbase has diversified its revenue sources over time. Its transaction revenue rose to $1.07 billion in the first quarter, helped by the robust crypto prices. That was a big increase from the $374 million it made in the same quarter in 2023.

At the same time, it has grown its subscription and services revenue. In the first quarter, that revenue rose to $510 million from $361 million in the same quarter in 2023.

Another potential winner for Coinbase is its Base Blockchain, which it launched in 2023. In this period, the platform has beaten the likes of Tezos, Zilliqa, and Velasto become a top-ten blockchain. It has over $1.65 billion in total value locked (TVL).

Base is a private blockchain owned by Coinbase, meaning that it takes all the revenues generated in the network. In the future, however, there are chances that Coinbase will launch an airdrop for the network.

Based on the valuation of platforms like Arbitrum ($2.1 billion) and Avalanche ($9.2 billion), we can assume that the Base will have at least $3 billion in valuation.

COIN earnings preview

Based on the low volume in the second quarter, analysts believe that Coinbase’s revenue will be $1.4 billion, down from $1.64 billion in the third quarter but 97% from the same period in 2023.

For the year, the company is expected to generate over $5.94 billion, a 91% increase from 2023. It will then rise to $6.14 billion in 2026.

Still, unlike other companies, it is relatively difficult to predict Coinbase’s future results because they are impacted by the actions in the crypto market.

Another potential risk for Coinbase is that it is highly overvalued since the company has a market cap of over $55 billion. It also exists in a highly cyclical industry with booms and busts.

Coinbase stock price forecast

COIN chart by TradingView

The daily chart shows that the COIN share price has been in a strong bearish trend in the past few weeks. After peaking at $282.65 in March, it has moved into a bear market as it dropped by over 20% from the highest point this year.

The stock has also dropped below the Woodie pivot point and the 50-day Exponential Moving Average (EMA). Also, the shares have formed what looks like a double-top pattern whose neckline is at $195. In most cases, this pattern is one of the most bearish signs in the market.

Therefore, the stock will likely continue falling as sellers target the key support level at $200, which is about 13% below the current level. This target is also at the first Woodie support.

The post Coinbase stock price analysis: buy or sell ahead of earnings? appeared first on Invezz

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