Coinbase chief executive Brian Armstrong is not very optimistic about his firm’s revenue this year. He claims earnings may be cut by half due to a prolonged crypto winter and waning investor confidence.
In an interview on Bloomberg’s David Rubenstein Show: Peer-to-Peer Conversations on Dec. 7, Armstrong said that this year’s revenue looks like it will be roughly half of what it was last year:
“Last year in 2021, we did about $7 billion of revenue and about $4 billion of positive EBITDA, and this year with everything coming down, it’s looking, you know, about roughly half that or less,”
The gloomy outlook comes as crypto markets appear to have hit the bottom of the bear cycle. On Nov. 22, total market capitalization dropped to long-term lows of around $821 billion or 73% off its peak.
Coinbase Transaction Income Tanking
Furthermore, Coinbase has some of the highest trading fees in the industry. It comes as no surprise that the company makes more than 85% of its revenue from those transaction fees.
In Q3 2021, the company reported $1.2 billion in revenue, a whopping 88% from transaction fees. In the third quarter of this year, that revenue was down 50%, resulting in a loss of $545 million. The outlook for Q4 2022 is equally as gloomy. The total revenue for 2022 is expected to be less than half of that for 2021.
With traders rattled and a lengthening crypto winter, Coinbase is making less profit from fewer transactions. Analysts have predicted that the low volatility will continue for some time, which means fewer trading opportunities in either direction.
Armstrong commented on the collapse of FTX, asserting it was a “massive fraud” rather than an accounting mismanagement, as claimed by SBF.
COIN Price Outlook
Coinbase stock has plunged 81% this year and a whopping 86% since its peak. COIN has actually performed worse than the major cryptocurrencies traded on the exchange.
According to MarketWatch, the stock lost 2.7% on the day in a fall to $41.27 in after-hours trading. Furthermore, COIN is very close to its all-time low of $40.64 last month.
Tech stock traders are now considering COIN as a “generational buy” since prices are likely to rebound when crypto markets do. This may not be until mid-2023 or later, however.
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