JPMorgan’s North American equity team is lowering its price target for shares of Coinbase Global from $78 to $60 for December.
The publicly listed crypto exchange draws the majority of its revenue from U.S. crypto trading levels, meaning its third and fourth quarter earnings hinge on crypto trading interest.
“We think pressure on Coinbase revenue from falling cryptocurrency markets will pressure the stock price,” JPMorgan analysts wrote.
Shares of Coinbase Global (COIN) sold down from their $72 high Wednesday to $62 Friday. Still hanging above its June lows, the stock has fallen 11% over the past five days and 75% year to date.
Analysts said Coinbase is expected to see low trading volume by U.S. retail crypto investors through December with the expectation that activity will pick up at the beginning of the first quarter of next year.
According to crypto volume indexer, Nomics, current volumes for Coinbase have fallen 15% over the past month to $48 billion. The figure is only half of the volume Coinbase’s trading business received at the beginning of the year.
As of its second-quarter earnings, Coinbase's revenue depends heavily on trading volume over the near term. Its business strategy aims to reduce trading as a profit mix by growing subscription and services products, which made up 18% of revenue in its second quarter.
Staking is the Coinbase subscription service that’s recently received the most attention from customers. Critical for proof of stake blockchain protocols, staking rewards investors who pledge capital with a percentage yield.
Regulation of businesses offering staking services has become less certain in recent days with the Securities and Exchange Commission (SEC) alleging the activity may trigger U.S. securities laws.
Coinbase provides staking services for ETH, ADA, SOL, ATOM, ALGO, XTY.
Notably, staking interest earned through Ethereum has gained growing momentum with the Ethereum protocol’s Merge transition to proof of stake, which some analysts have projected to increase interest payouts over the coming months.
Both staking and interest income earned from holding the stablecoin USDC is part of the company’s subscription services revenue which are deemed as having lower volatility than trading.
In the second quarter, Coinbase reported two-thirds of its customers were engaged in what it calls these “non-investing activity” and that was largely due to staking Coinbase’s chief operating officer, Emilie Choi, said at a Goldman Sachs conference.
Based on the assumption that 20% to 40% of ether held by Coinbase is staked, Goldman Sachs projected earlier this month that Coinbase could generate $250 to $600 million in staking revenues from ether alone, partially offsetting its decline in trading volume during crypto’s bear market.
Though considered a less volatile revenue stream, JPMorgan’s equities team cut back their near-term expectations for Coinbase’s staking business, saying it “has less upside given the selloff in crypto” according to the note.
Holding a nearly 14.5% market share according to data published on Dune Analytics, Coinbase already represents a major player in ether staking.
Yet the activity also comes with “lockup risks” according to the note. Investors cannot withdraw staked ether until the Ethereum protocol implements its Shanghai upgrade set for sometime in the second quarter of 2023.
Though crypto trading volumes remain low, JPMorgan isn’t anticipating “much in terms of writedowns” for the third quarter based on cryptocurrency prices held on the company’s balance sheet.
“Although the quarter is not over and some tokens did see 3Q lows slightly below 2Q lows,” the team added.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
Click here for the latest crypto news, updates, values, prices, and more related to Bitcoin, Ethereum, Dogecoin, DeFi and NFTs
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
The world’s largest cryptocurrency is down. But not out.
Earlier this month, office use hit a post-pandemic high of just 47.5% within 10 major metro areas. At the Seagram Building on Manhattan’s Park Avenue, the percentage is far greater.
Behind U.S. dollar strength is the Federal Reserve, which is steadfastly holding to its commitment to curb soaring price inflation.
The tax agency is about to hand out more than a billion dollars to taxpayers.
It is the worst year for buying the stock-market dip since the 1930s. Instead of rebounding after a tumble, stocks have continued to fall, denting a strategy that soared in popularity over the past decade.
When layoffs surged in the spring and summer, the U.S. economy showed the early warning signs of recession. Except, it turns out, there was no surge in people losing jobs.
A soaring U.S. dollar is wreaking havoc in markets. Analysts say it will be hard for stocks to find their footing until the currency cools down.
Over the past year, insiders sold US$3.2m worth of Analog Devices, Inc. ( NASDAQ:ADI ) stock at an average price of…
(Bloomberg) — Bruised from a tumultuous year, China stock investors are looking to capitalize on any potential policy shifts at the twice-a-decade Communist Party congress next month.Most Read from BloombergBank of England Says Paper Banknotes Only Good for One More WeekThe Great Bond Bubble Is ‘Poof, Gone’ in Worst Year Since 1949‘Read Putin More Often and Carefully,’ Lavrov Tells the WorldUK Market Plunge Sparks Talk of Emergency BOE Rate HikeA key strategy is to bet on more stimulus for the
The S&P 500 could retest its June low in the week ahead as equity markets endure a brutal bout of selling spurred by fears the Federal Reserve’s inflation fight may cause a recession.
I own two energy stocks and both have big yields, solid businesses, and plans for the long-term energy future.
Estate planning goes beyond drafting a will. Use this pre-death checklist to account for your assets and ensure they are dispersed as you wish,
DEEP DIVE Another difficult week for U.S. stocks ended with shares of oil producers sliding and Ford Motor Co. tumbling further on concerns over supply shortages. The S&P 500 (SPX) fell 1.7% on Friday for a one-week decline of 4.
For the first time in the short life of cryptocurrency, major crypto platforms have turned to US bankruptcy law to salvage their insolvent businesses. Now it's largely up to bankruptcy courts to determine how to divvy up customers' frozen crypto assets.
In a move that few saw coming, the only real estate investment trust in Berkshire Hathaway's portfolio has agreed to be acquired.
Apple’s push into live sports continues as the tech giant announced it will sponsor the Super Bowl halftime show.
These billionaire investors think these cryptocurrencies will be great investments over the long term.
It was a rough week in the stock market as the Federal Reserve renewed its commitment to do whatever it takes to bring down inflation, even if it means pain in the economy.
Cryptocurrency News: The IRS tracks down unpaid crypto taxes. Coinbase denies proprietary trading. China makes up 84% of blockchain patents.
Japan's Mazda Motor Corp is discussing ending production of its vehicles at a joint venture plant in Vladivostok, eastern Russia, the Nikkei newspaper reported on Saturday. The Japanese automaker, which sold 30,000 cars in Russia last year, said in March that exports of parts to the plant were going to end and production would cease when stocks ran out. Mazda has not made a decision about ending car sales and maintenance operations in Russia, the newspaper said.