Earlier Coinbase laid off its employees in bulk as damage control amidst the market crash
American multinational investment bank Goldman Sachs mentioned in its report on Monday, cut down the rating of Coinbase from neutral to sell. Further this report also reduced Coinbase price target from $70 to $45. This fall in rating and price expectation of the crypto exchange came in the wake of continuously declining crypto prices and the repercussions of this price fall in the form of decreasing industry activities.
However, it’s not that the report of Goldman Sachs went all negative, for instance, it has pushed the rating of Robinhood Markets from sell to neutral and puts the price target of $9.50. As far as the share price of Robinhood is concerned, it has seen a gain of 2.6% and traded at around $8.21 during pre market trading.
Current level of digital assets and their trading volumes indicated the possibilities of further downgrade on the revenue base of Coinbase. Goldman predicts that it could fall by around 61% in 2022 and about 73% by the half of this year. The bank report further noted that although actions were taken in regards to cutting down the cost as laying off 18% of salaried employees from the company, Coinbase and CEO Brian Armstrong would need further actions.
The Wall Street giant said that the leading crypto exchange would need to take action towards significantly reducing its cost from base to step that could result in massive cash burn looking at the lag in trading activity. Report further added that the company is currently under a tough situation where it has to make difficult choices and choose between significant reductions and shareholder dilution for effectively compensating employees.
When it comes to the competitive environment as well as the fee rate compression, the outlook of Goldman is more bearish on this. This is due to the announcement of Coinbase and Coinbase Pro Platforms’ merger that could potentially reduce the cost of switching and let lower prices be available to users more.
Currently the leading crypto exchange in the United States, Coinbase is trading at $55.96 with a drop of 6.75% in a day with a market capitalization of about $11.5 billion.
Source: https://www.thecoinrepublic.com/2022/06/28/has-the-fall-in-crypto-prices-made-coinbase-face-a-fall-in-goldman-sachs-rating/