Crypto exchange Coinbase’s (COIN) trading volumes in the US have slowed more than what was anticipated in the third quarter of the year. This was reported by investment bank Berenberg in a research that was published on Tuesday.
As per the findings, the exchange’s trading volume fell by around 17% sequentially and by about 52% year-on-year. As per Coinbase’s official website, it will release its third quarter 2023 financial results, along with its shareholder letter on 2 November 2023 after market close.
The weaker-than-expected trading volumes was a repercussion of the “persistent crypto winter”, said the report. However, Berenberg also raised its estimate of the company’s consumer transaction revenue to $240.8million from $210m. This was because the team expected Coinbase’s consumer take rate to “contract at a slower pace than we had been anticipating”.
The bank added: “We continue to view COIN’s consumer take rate as being at risk of compression due to competition for market share within a lower volume crypto space.”
The analysts then reiterated their ‘hold’ recommendation on the COIN stock and maintained a price target of $39. Yesterday, Coinbase’s shares closed at $77.46. At the time of press, it was trading around the same level, up by over 2% in the last 24 hours.
The ‘hold’ rating reflected the bank’s view that the stock is “uninvestable in the near term”. Berenberg’s lead analyst, Mark Palmer, added: “We continue to view COIN through a cautious lens, especially after the stock has traded up by more than 112% this year versus ~72% for Bitcoin and ~29% for the tech-heavy Nasdaq.”
On top of this, the exchange’s ongoing legal tribulations with the US Securities and Exchange Commission (SEC) may continue to be an “overhang” that will be a barrier to any positive momentum in the company’s share price.
However, the bank’s concern about the Coinbase Global’s operating performance during the next couple of quarters was not its “primary driver of the cautious stance”, but: “…rather on the threats to its business from the various regulatory actions and litigations that it faces in the US, as well as others that it could face in the future as the regulatory crackdown on crypto continues.”
The Hamas effect
Another area that the analysts touched upon in the report was how the ongoing political headwinds emanating from the Israel–Hamas conflict affected the exchange’s ramped-up lobbying efforts. The exchange had drastically worked on its lobbying efforts in the US, pushing for a more crypto-friendly regulation in the country.
However, headlines around Hamas’ use of crypto started had making rounds since the start of the conflict. There have also been reports of how Israeli authorities shut down and seized more than 100 accounts on Binance and other crypto exchanges that were being used to aid Hamas in its fundraising efforts. Talking about its effect on crypto’s legal status, Palmer wrote:
“While Hamas announced last April that it would no longer use crypto for fundraising due to the ability of authorities to track its movement on blockchain ledgers, we believe the recent headlines are likely to make clarity around the question of crypto’s legal status even more elusive.”