Wall Street is forecasting a more than 50% drop in revenue from a year earlier and expects Coinbase to report a loss of around $585 million. The company posted a profit of $1.6 billion in the second quarter of 2021.
Still, some investors are hopeful that the worst is soon over. Coinbase shares are up more than 30% in the last five trading days.
The rally is partly due to the recent rally in cryptocurrency prices. Ethereum, for example, is up more than 8% in the last week. But there is another big reason for Coinbase’s comeback.
A partnership with the Wall Street giant and owner of iShares black rock (BLACK)which had about $10 trillion in assets under management at the end of last year, before the big stock and crypto crash of 2022, may also help boost investor sentiment for Coinbase.
Coinbase executives Brett Tejpaul and Greg Tusar said in an Aug. 4 blog post that the partnership will allow BlackRock’s institutional investors to trade bitcoin through the platform’s Coinbase Prime service.
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Ecosystem Partnerships. from BlackRock, in the blog post.
Coinbase executives hailed the news as “an exciting milestone” for the trading platform, adding that “we are honored to partner with an industry leader and look forward to furthering Coinbase’s goal of bringing greater access and transparency to cryptocurrencies.” .
Despite the drop in cryptocurrency prices this year, many major financial firms still believe they need an active presence in the bitcoin market. So partnering with BlackRock, the world’s largest asset manager, provides some much-needed validation for Coinbase.
But it may be premature to say that the worst is over for the company. Cryptocurrency prices continue to fluctuate wildly, and that will continue to hurt Coinbase’s revenue.
In June, the company announced plans to lay off almost 20% of its staff, with CEO Brian Armstrong warning of an impending recession and the possibility of a “crypto winter” that could “last for an extended period.”
There are other concerns as well. The Securities and Exchange Commission is investigating whether Coinbase is illegally allowing customers to trade some unregistered crypto securities on its platform. Coinbase has strongly denied this. The SEC also recently indicted a former Coinbase product manager for insider trading.
And one of Coinbase’s biggest bulls has also turned cautious. Tech stock guru Cathie Wood of Ark Invest recently cut Ark’s stake in Coinbase in several of the firm’s ETFs.