(P1) Wall Street analysts are sounding the alarm on crypto exchange profitability, with firms including Barclays and Oppenheimer cutting first-quarter forecasts for Coinbase after a roughly 30% drop in trading volumes. The downgrades come as slumping token prices and waning retail interest create significant headwinds for upcoming earnings reports.
(P2) "Global crypto trading activity has declined to a level not seen since the end of 2023," Barclays analysts said in a note, which downgraded Coinbase (COIN). The bank warned that "absent a resurgence in near-term crypto trading activity, we see profitability under pressure at Coinbase."
(P3) The slowdown is reflected in exchange data, with Barclays noting Coinbase’s March trading volume was the weakest since September 2024. Oppenheimer cut its Q1 volume estimate for the exchange to $211 billion from $244 billion, forecasting revenue of $1.48 billion. The broader market slump saw Bitcoin lose over 22% of its value in the first quarter, while Ether fell 29%.
(P4) The core issue is the sector's reliance on transaction fees, which evaporate when trading dries up. While firms are attempting to diversify into derivatives and stablecoins, Barclays noted these efforts are "likely to take a long time to pay off." The wave of preemptive downgrades, which also includes Rosenblatt lowering its rating on Bullish (BLSH) and Compass Point downgrading Circle (CRCL), suggests analysts expect a tough earnings season for the entire crypto platform sector.
This article is for informational purposes only and does not constitute investment advice.
