San Francisco-based cryptocurrency exchange Coinbase (COIN) is experiencing a notable decline in trading volumes in the United States, surpassing initial expectations, according to a research report from investment bank Berenberg, published on Tuesday.
In the third quarter, Coinbase’s trading volume dropped approximately 17% in a sequential fashion and saw a year-on-year decrease of around 52%, as reported by The Block. On November 2, Coinbase is scheduled to release its third-quarter financial results.
Berenberg has expressed concerns about Coinbase’s consumer take rate, which it believes is susceptible to compression due to heightened competition for market share within a crypto market characterized by reduced trading volume. Mark Palmer, an analyst at Berenberg, stated, “The primary driver of our cautious stance towards Coinbase Global is not our concern about the company’s operating performance during the next couple of quarters, but rather on the threats to its business from the various regulatory actions and litigations that it faces in the U.S., as well as others that it could face in the future as the regulatory crackdown on crypto continues.”
Furthermore, the report highlights that political and regulatory challenges may weaken the impact of Coinbase’s intensified lobbying efforts, particularly in light of recent headlines concerning Hamas’ utilization of cryptocurrency, which adds complexity to the issue of cryptocurrency’s legal status.
Despite the persistent crypto winter and the array of regulatory hurdles confronting Coinbase, the report notes that the company’s shares are currently trading at a valuation similar to their late 2021 levels, which marked the peak of the previous crypto bull run. In fact, Coinbase’s shares have appreciated by more than 112% in the current year, surpassing the 72% gain of Bitcoin (BTC) and the 29% increase of the Nasdaq stock index.
Berenberg has reiterated its hold rating on Coinbase stock, along with a $39 price target. As of Tuesday’s closing, Coinbase shares were valued at $77.46.
