Coinbase Earnings Preview

Crypto has been in a slump but the new deal with Blackrock to bring in more institutional investors could be a game-changer for Coinbase, which has seen a big bounce since the news.
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Its about institutional clients

COIN jumped 45% after the company announced a strategic partnership with multitrillion asset manager Blakcrock last Thursday. The deal is expected to reel in a portion of intitutional clients from Blackrock’s Aladdin platform.

While retail traders do support Coinbases revenue, the firms bread and butter are Institutional traders, which amount to over three quarters of trading volume on the platform. That concentrates more on the more established BTC and ETH and provides less revenue per transaction but more stability of income.

Still in this release, the company could be looking at negative earnings as the deal will have no impact to the company’s quarterly volumes for a while yet.

Crypto trading

Robinhoods earnings showed that income from crypto unexpectedly increased by 7% over the last quarter, suggesting its a more resilient sector than many might have anticipated. Even if the market isn’t trending higher, day trading crypto volumes remain.

Coinbases reliance on institutional investors might provide some resilience in their revenue stream, which could finally filter down to the bottom line after job cuts and other cost-cutting measures taken in the first quarter.

What to focus on

For Q2, the focus is likely to be on the trading volume, and the product mix. Another factor that could support Coinbase shares is if there is a rebound in the retail trading volume. The firm already guided negative earnings for the rest of the year, and expects MTUs lower as well.

Another reduction to the outlook could substantially hurt the stock, because it would be a blow following good news of the Blackrock paternership. On the flipside, given that there has been a sudden surge in optimism on the stock price, the shares could underperform immediately after the news release unless the top end of expectations are met.

Coinbase is forecast to report -$2.47 in earnings, on significantly lower revenues of $873.8M.

Coin breaks above bearish trendline

The share prices of coinbase have recently broken above the long-term descending trendline connecting $368 and $206, near $80. It so happens the breakout level had also been the top of the short-term range the stock traded within since the low of $45 on May 12. Now, the recent impulse has been stopped by the 100-day average near $100.

The RSI is overbought and the daily rejection is more bearish than bullish given the suppression down to a $90 close. If the pattern plays out, Coin could return to generational lows. Inversely, getting past the $100 handle will open up a possible run to $150 and eventually the 200-day average.

Key Takeaways

The Coinbase-Blackrock deal has led to a short-term spike in Coinbase’s stock price. Although the company’s bread and butter are institutional traders, the assets offered to them generate
less revenue for the company.

Robinhoods earnings show that income from crypto has increased in the last quarter and it could show up on Coinbase’s bottom line. The near term outlook for Coinbase shares depends on the quarterly trading volume, the product mix, and any earnings developments. The shares could underperform immediately after the news release unless the top end of expectations is met.