Coinbase's 'existential overhang' is eclipsed by the Bitcoin ETF frenzy.

Nov 5
With the eagerly anticipated launch of an exchange-traded fund that makes direct Bitcoin investments seemingly on the horizon, sentiment surrounding Coinbase Global Inc. is increasing. This raises the likelihood of a broad surge in demand and seems to be driving away some investors from the uncertainty surrounding the biggest cryptocurrency exchange in the United States.

A spot launch of a Bitcoin ETF in the US, according to analysts, may draw in additional business but also turn off investors from the platform. Coinbase's prospects are further clouded by the Securities and Exchange Commission action that was brought in the first half of the year.

Analysts surveyed by Bloomberg predict revenue of $654.7 million, down from $590 million in the same period last year, even though trade activity is probably down more than 50%.
 
The stablecoin USDC, which earns greater interest income from its reserves due to rising interest rates, as well as higher fees that Coinbase collects from its trading clients, are the main sources of revenue for Coinbase, according to analyst John Todaro of Needham & Co.

According to estimates, Coinbase's quarterly loss decreased to about $130 million from $544.6 million during the same period last year. Despite this, it would still be the company's seventh consecutive quarterly loss as the sector continues to be pressured by the cryptocurrency's price slide from late 2021 highs.
 
This year, Coinbase shares have increased by almost 120% to about $78. The price has increased, but it is still far from reaching its peak of over $400, which was attained when the business originally listed its shares on the Nasdaq in April 2021.
TD Cowen analyst Stephen Glagola stated, "Most of the stock's gains can be attributed to optimism about Bitcoin ETFs, but investors are overlooking potential regulatory changes."

According to him, Coinbase may separate into an exchange, a custodian, and a retail brokerage if it loses the SEC case.

Given that more small-time investors are pouring money into Bitcoin, including through the Coinbase platform, the ETF craze may help Coinbase's retail division.
 
The business is a potential growth catalyst since numerous proposed Bitcoin spot ETFs intend to employ its custodial services, even though its combined custodial and institutional trading revenue only makes up a small portion of its retail trading sales.

It is also anticipated to gain from the upcoming "Bitcoin Halving," which will see a halving of new coin issuance in the first half of 2019. Previous halvings have usually produced profits, which has drawn more retail investors—Coinbase regulars—into the market.
According to researcher CCData, Coinbase's third-quarter spot trading volume was probably the lowest since the company went public, down 52% year over year.

However, there are still worries that Coinbase shares may become less of a proxy for the Bitcoin market as a result of ETFs.

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