In a striking demonstration of the diminishing enthusiasm among investors in the cryptocurrency realm, Coinbase Global Inc. witnessed a substantial decline in its spot trading volume during the recently concluded third quarter.
The largest digital asset platform in the United States reported approximately $76 billion in spot trading volume, representing a staggering 52% drop from the same period last year, according to data compiled by the research firm CCData. This figure is also believed to be the lowest since the company’s highly publicized direct listing on the Nasdaq Stock Market in April 2021, which occurred just a few months before the cryptocurrency market reached its peak in terms of valuations.
Trading volume is an essential metric for cryptocurrency exchanges, as a significant portion of Coinbase’s revenue is derived from trading fees. In the second quarter, Coinbase revealed that transaction revenue accounted for 54% of its total revenue. The decline in trading volume reflects a year-long trend across the cryptocurrency industry, following a series of scandals, bankruptcies, and regulatory actions.
Owen Lau, an analyst at Oppenheimer & Co., commented, “Overall, it appears to have been a challenging quarter for Coinbase.” He maintains a “market perform” rating on the company’s shares.
Analysts surveyed by Bloomberg anticipate that Coinbase will report its seventh consecutive quarterly loss when it releases its results on November 2. A spokesperson for Coinbase did not respond to requests for comment.
Despite the decline in trading volume, Coinbase appears to have gained market share during the quarter, while the industry leader, Binance, faced increased regulatory scrutiny. According to CCData, Coinbase’s share of the overall spot trading volume likely increased to 5.7%, up from 4.2% the previous year.
Mizuho Securities anticipates that Coinbase’s trading volume will fall short of the consensus estimate of $86 billion, with revenue expected to be 10% lower than forecasts. The firm, which has an “underperform” rating on Coinbase, revised its trading volume estimate down to $72 billion on October 4 and does not anticipate a significant improvement in the current fourth quarter, according to analyst Ryan Coyne.
The declining trading volume occurs against the backdrop of regulatory challenges for Coinbase, as the company faces allegations from the U.S. Securities and Exchange Commission, including running an illegal exchange. Coinbase is currently contesting these charges in court.
Coinbase’s shares have more than doubled in value this year, reaching approximately $80, after a steep 86% decline last year. This is a significant departure from the stock’s price of over $350 shortly after its Nasdaq listing in early 2021.