Mizuho stock analyst Dan Dolev says he’s not bullish on Coinbase (COIN) due to concerns about the state of the crypto markets.
Speaking on CNBC, Dolev says he foresees a “lingering crypto winter” that will lead to depressed revenues for the top US crypto exchange.
“They [Coinbase] make a lot of money when people buy and sell. So if our playbook continues, there will be a crypto winter, a lingering crypto winter, which we’ve actually figured out in a survey that we did recently.
And that doesn’t bode well. It actually bodes poorly for Coinbase revenues. So I wouldn’t recommend holding on to it.”
Dolev says that even if Coinbase’s revenues were to increase, the take rate, or the percentage in fees and commissions generated, is in a downward trend.
“At the end of the day, even if the volumes go up, the take rate or the yields continues to come down. So we’ve seen a consistent degradation of the yield over time.”
Dolev says that Coinbase’s declining take rate is caused, in part, by increased competition and the entry of low-margin clients.
“There is more institutional and institutional actually pay a much lower fee. Two, there is a lot more Coinbase Pro on the system and Coinbase Pro comes in at a much lower fee than the regular Coinbase.
Three, over time, we expect more competition from the Cash App, from Venmo… We have done surveys that show that 40% of Coinbase traders of Bitcoin trade Bitcoin on other platforms.
So I think over time, you are getting a lot more negatives than positives impacting the yield and competition. And that’s going to drag down revenues regardless of whether it’s a winter or not.”
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