The intense market volatility that previously drew speculative investors to the cryptocurrency ecosystem is subsiding, significantly affecting exchanges like Coinbase (COIN), which historically benefited from periods of significant fluctuations.
Although Coinbase exceeded financial expectations for the first quarter of 2024, it reported a trading volume of $56 billion, a notable decrease compared to the peak of $177 billion seen in late 2021.
How Coinbase Handles Declining Volume of Trading
As to a Bloomberg report that references CCData research, the average volatility of digital currencies has dropped from approximately 79% in 2021 to 57% this year. This decline points to a stabilizing market that offers more sustained growth even as it is less alluring to high-risk investors.
Alesia Haas, CFO of Coinbase, emphasized this increased stability during a JPMorgan conference.
Compared to 2021, volatility appears to be much more mature in this cycle. The volatility of Ethereum and Bitcoin is beginning to appear "on the grid," according to Haas.
Exchange-traded funds (ETFs) that track spot Bitcoin have also resulted in more organized market inflows. As a result, in March 2024, Bitcoin reached a new all-time high of over $73,000.
As Bobby Zagotta, CEO of Bitstamp USA, observes, the cryptocurrency market still retains some level of volatility, although it's expected to be less extreme compared to previous cycles due to increased maturity. While Coinbase's financial performance for the first quarter of 2024 was strong, it still falls short of the peak witnessed in 2021, and its future success hinges on factors like the duration of the current bull market and its ability to maintain market share, which has slightly decreased since early 2023.
Coinbase has also faced technical challenges, including platform outages, highlighting the importance of improving platform stability to uphold trader confidence. To diversify its revenue sources, Coinbase has ventured into custodianship for US spot Bitcoin ETFs and is poised to do the same for upcoming Ethereum ETFs. Its involvement in the Base network is anticipated to contribute significantly to its revenue stream, potentially leading to more stable and predictable earnings.
According to analyst Owen Lau from Oppenheimer & Co., this diversification could result in more consistent revenue, potentially increasing Coinbase's earnings multiple.
From a technical perspective, COIN stock has shown significant activity in 2024. Following a local high in March, the stock entered a consolidation phase before breaking out of this range in late May. Currently, the stock is testing a new support level, and if it holds, there could be a potential rally of up to 20% as it aims to retest previous highs from March.
May 2024, Cryptoniteuae