Coinbase’s trading volumes dwindle ahead of earnings, retail volume could have ‘bottomed out’

The decline in the circulating supply of USDC and the stablecoin’s own banking issues during the first quarter, as it de-pegged following the collapse of Silicon Valley Bank, may impact Coinbase’s bottom line going forward. 

USDC total supply, source: The Block

“The de-peg may have ignited a confidence crisis, and yes, the lower circulating supply (e.g. USDC market cap) is likely to have an impact on 2023 earnings,” Ryan Coyne, a senior associate at Mizuho, told The Block. 

Coinbase’s interest income payout is determined by the following formula, based on its revenue-sharing agreement with Circle.

“So given that COIN’s interest income is derived on a TTM basis, the recent decline in USDC in circulation will have a lagged impact,” Coyne said. It may modestly impact 1Q results but will have a more outsized impact as the year progresses, Coyne concluded.

Needham’s John Todaro echoed Coyne’s comments, noting the de-peg happened at the end of the quarter. Todaro said Needham expects lower interest income for Q2 2023. “This should partially be offset if we get 1-2 more rate hikes.”

Mizuho lowered its price target for Coinbase to $27 from $30, citing muted trading volumes and the sharp decline in USDC market cap as “likely to weigh on transaction revenue and interest income.”

Shares in the exchange were trading at $49.13 around 12:30 p.m. ET, down 4.2% since the open, according to TradingView data.