Wall Street has cut profit forecasts for Coinbase and Block, two previously high-flying fintech companies, as a freeze in cryptocurrency markets causes further harm to the companies already struggling with skyrocketing costs.
Crypto winter: the signs
During the second quarter, Coinbase, the cryptocurrency exchange, is expected to announce financial losses, as opposed to Jack Dorsey’s payments startup Block, which is expected to report an adjusted profit decline of 70%.
.@MarkYusko says #cryptowinter is when the price exceeds the value of a particular coin. He tells our @DanielaCambone that bitcoin is "currently below its fair value," hinting that winter may be over for the blockchain technology. Watch now ➡️ https://t.co/X1b7ZheKsO pic.twitter.com/sUQeSCCTsp
— Stansberry Research (@Stansberry) July 29, 2022
The rapid decline in Coinbase’s market capitalization this year has made Coinbase the most vulnerable cryptocurrency exchange. Mizuho Securities USA’s senior analyst for fintech stocks, Dan Dolev, says Coinbase will face an extremely challenging future.
This year’s stock market crash caused Block’s market value to drop more than half, which is what it used to be before it changed its name from Square.
In the Bitcoin industry, a number of businesses have been adversely impacted by the selloff of Bitcoins; some have even filed for bankruptcy protection. During the first seven months of this year, the value of Bitcoin has almost halved.
According to Dolev, a possible double-digit staff reduction (at Coinbase) is caused by rising costs. Fintech equities are also declining because of estimate reductions and competitive challenges, according to Credit Suisse analysts.
In the United States, the largest market for cryptocurrencies, regulatory obstacles remain despite a recovery in the market following a brutal selloff. On Tuesday, Robinhood Markets Inc. announced a 44 percent decline in second-quarter earnings and announced a 23 percent reduction in staff.