Coinbase trading volume in the first-quarter report was $309 billion but in April was only $74 billion which could be poorer in Q2
The current macroeconomic instability, which includes inflation, and the war in Ukraine have been a headwind for the crypto market.
This issue has had a particularly negative impact on Coinbase, which recently reported a 27% reduction in revenue and a $430 million net loss.
Coinbase Stockholders Are In Pain
The cryptocurrency market has dropped over 39% from the beginning of April to the end of May. Coinbase’s management team, led by co-founder and CEO Brian Armstrong, issued dismal second-quarter expectations as a result of this weakness.
They estimate retail monthly transacting users (MTUs), which are defined as users who transact at least once on the platform in the preceding 28 days, to be lower than the 9.2 million retail MTUs reported in the first quarter.
Because transaction fees accounted for 87 percent of Coinbase’s entire net revenue in Q1, it’s easy to see how the company’s Q2 results will be poorer than the previous quarter due to fewer MTUs and lower trading activity.
That means investors should expect prolonged income statement losses, especially given the company’s current aggressive hiring binge.
Crypto Market Likely To Affect Coinbase Q2 Report
The reason for this is, predictably, the weak crypto market. When both crypto asset prices and volatility are high, Coinbase’s business model thrives, as it encourages individual and institutional users to trade more frequently, resulting in more money for the company.
This is what happened in Coinbase’s record-breaking fourth quarter of 2021.
However, if digital asset prices decline, the converse is true, and this dynamic corresponds to Coinbase’s poor performance indicators.
If things turn around in the crypto market for the rest of May and into June, Coinbase’s financials might be a pleasant surprise.
However, because this is a very difficult thing to forecast, it’s essential to listen to the management team and approach a Coinbase investment with an exceptionally long-term attitude.
The appropriate approach is to focus on the next decade rather than trying to predict what will happen with crypto pricing in the next quarter.
The potential gains from owning Coinbase stock can be life-changing if you adopt this mindset.