Coinbase Losses Expected to Narrow; Analysts Seek Details About International Exchange

Traders of U.S.-based crypto exchange Coinbase (COIN) will likely get some relief when the company reports first-quarter earnings for 2023 on Thursday.

Coinbase is expected to show a slight increase of roughly 8% in revenue compared to the previous quarter, according to forecasts from FactSet. In January, the exchange reported revenue of $605 million in Q4 of 2022; projections for this quarter are for $655 million.

The earnings report will also likely show a quarterly loss of $1.45 per share. Trading volume for the period ending March 31 is estimated to be $148 million, up from $146 in Q4, FactSet projects.

“We estimate Q1 saw volume remain nearly flat quarter over quarter, which would be the first quarter since the crypto boom unwound that Coinbase's quarterly volume did not decline,” Needham senior analyst John Todaro wrote in a report. “ This gives us optimism that retail volume could have bottomed.”

Needham lowered its 2023 year-end revenue estimate slightly to $3.44 billion from $3.66 billion, citing “a slower recovery than initially projected” and disappointment in volume that “has not risen proportionately to crypto prices,” the report said.

Cryptocurrencies across the board have benefited from a new wave of risk-off sentiment since the recent banking crisis, with mistrust in traditional finance sparking the renewed interest in digital assets. Bitcoin (BTC) broke above $30,000 on April 10 for the first time since June 10, 2022. It was recently trading at $28,600, up 74% year to date.

Investors have been particularly interested in Coinbase’s recent unveiling of its derivatives exchange in Bermuda, which is part of the company’s expansion outside the U.S., because it could have a positive impact on revenues coming from fees. The initiative comes as regulators crack down on crypto companies in the country.

Read more: Editorial: It Sure Looks Like the U.S. Is Trying to Kill Crypto

“The non-U.S. crypto derivatives market is considerably larger than the spot trading market, and while Coinbase's offshore business is smaller than its U.S. business, we think the upside could potentially be meaningful,” Barclays analysts wrote in a note.

They added: “Our checks indicate that crypto activity outside the U.S. tends to skew more heavily towards retail users, which would be supportive of the aggregate fee rate earned on these contracts.”

Coinbase’s international exchange will allow traders to bet on the price of bitcoin (BTC) and ether (ETH) via perpetual futures contracts with up to five times leverage, a popular form of derivatives trading that is illegal in the U.S. because of its high risks.

“Perpetual futures trading accounts for around 75% of global trading volume,” Owen Lau, senior analyst at Oppenheimer, told CoinDesk TV. “If they can expand that and take some market share, it will be incremental.”