Cryptocurrencies have been on a downslide recently, with Bitcoin (BTC) hovering near the $20,000 mark and having lost more than half of its value, down 57.6% year-to-date. Globally, the crypto market capitalization currently stands at $897.7 billion.
This crypto meltdown has also impacted cryptocurrency exchange platforms like Coinbase Global (NASDAQ: COIN). Shares of Coinbase have tanked 79.3% this year and are currently trading just above the 52-week low.
The crypto volatility also caused Coinbase to lay off around 1,100 employees recently, representing around 18% of its workforce.
Moreover, this volatility also resulted in a decline in trading volumes to $309 billion in Q1 from a record $548 billion in Q4.
COIN expects total trading volume to decline further in Q2 compared to Q1 and also anticipates monthly transacting users (MTUs) to fall further versus Q1.
The unpredictability of cryptocurrencies has led Mizuho (MFG) Securities analyst Dan Dolev to wonder about “potential crypto fatigue.”
The analyst analyzed crypto trading volume trends for the months of May and June and compared them with volume trends between January 2021 and April 2022 on the Coinbase platform.
This analysis indicated that between the periods January 2021 and April 2022, the “average daily trading volume on the COIN platform on Bitcoin down-days was 15% higher than volumes on Bitcoin up-days.”
However, in the months of May and June 2022, trading volume when Bitcoin was down exceeded trading volumes when crypto prices were on an upswing “by an average 42%, or nearly 3x the prior spread.”
Elaborating further on this, Dolev pointed out that trading volume on the COIN platform “has historically closely tracked the price of Bitcoin.” However, this pattern broke recently as “average daily trading volume on COIN has increased +36% in the most recent two weeks vs. the two weeks prior despite Bitcoin prices falling roughly -30% during the same time period.”
However, even with this surge in volumes, trading volumes on COIN are still down by more than 30% from Q1 and 10%-15% below consensus estimates, according to the analyst.
Dolev is of the view that this break in trading patterns is an indicator for investors to “tame expectations.” As a result, Dolev remained sidelined on COIN with a Hold rating and the lowest price target on the Street of $45. The stock has already overshot this valuation, implying a downside potential of 13.3% at current levels.
Other Wall Street analysts, however, remain cautiously optimistic about COIN with a Moderate Buy consensus rating based on 14 Buys, four Holds and two Sells. The average COIN price target of $137.84 implies 165.5% upside potential from current levels.
Bottom Line
It remains to be seen how COIN will fare in Q2 considering the crypto volatility and the difficult macro environment. For now, however, Wall Street analysts seem to be cautiously optimistic about the stock.
Investors on TipRanks, however, remain very positive about the stock, as indicated by the TipRanks Crowd Wisdom tool. This tool indicates that 16.6% of the best-performing portfolios on TipRanks have increased their holdings of the stock in the past 30 days.
