Trading volumes the center of attention after Bitcoin’s drop from highs

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Coinbase Global (COIN) is expected to release its second quarter results after market close on Tuesday, offering a snapshot of the performance of the largest cryptocurrency exchange in the United States following a volatile trading period for currencies digital.

Here are the main results Coinbase is expected to report, compared to consensus data compiled by Bloomberg:

Coinbase shares have traded volatile since the stock’s direct listing in April and have languished widely below their opening price of $ 381 a coin amid a wider drop in cryptocurrency prices. .

Bitcoin (BTC-USD) prices hit a record high of over $ 64,000 at the time of Coinbase’s public debut, but have since fallen to a low of less than $ 30,000 since mid-July. Bitcoin, the largest cryptocurrency by market cap, was trading around $ 46,000 on Tuesday morning.

Falling prices for bitcoin and other major tokens like ethereum (ETH-USD) have coincided with a regulatory crackdown on cryptocurrencies and mining in China, as well as growing concern about the widespread adoption of digital currencies. Tesla CEO Elon Musk said in May that the electric car maker will no longer accept bitcoin as a payment method for vehicles. However, Tesla (TSLA), along with a number of other companies, including Square (SQ) and PayPal (PYPL), still hold bitcoins on their balance sheets.

The weakening of the cryptocurrency-related results in the businesses of these other companies during the second quarter pointed to a potential slowdown for Coinbase. Bitcoin accounted for $ 2.7 billion in overall revenue for Square in the second quarter, up from $ 3.5 billion in the first quarter of 2021. And Tesla, for its part, recorded a bitcoin-related depreciation of $ 23 million in the second. quarter, after posting a positive result the impact of $ 101 million from the sale of some of its bitcoin holdings in the first quarter of the year.

Given these trends in other companies exposed to cryptocurrencies, quarterly trading volumes for Coinbase should be watched closely. In the first quarter, Coinbase said bitcoin and ethereum accounted for 39% and 21% of its overall trading volumes, respectively, leaving the company vulnerable to a drop in trading fee revenue if those volumes decline significantly alongside the increase. price drop. Still, Wall Street expects Coinbase’s trading volumes to increase sequentially to $ 377.4 billion in the second quarter, from $ 335 billion in the first quarter.

Photo from: STRF / STAR MAX / IPx 2021 02/26/21 Coinbase filed its S-1 on February 25 for release to the public, listed on Nasdaq. Coinbase’s IPO valuation could be the biggest for a U.S. tech company since Facebook went public. STAR MAX photo: the Coinbase logo photographed on a 2020 iphone SE.

Going forward, regulatory risks also remain a concern for Coinbase and other crypto platforms that rely heavily on trading fees. Last week, Securities and Exchange Commission Chairman Gary Gensler compared the crypto trading environment to the “Wild West” and suggested that a number of trading platforms offer illegal and unregistered securities. And on Monday, the Wall Street Journal reported that former SEC Director Brett Redfearn resigned as head of Coinbase’s capital markets group after just four months, apparently due to a strategic shift over. the cryptographic platform.

And elsewhere in the US regulatory landscape, legislative risks also remain. On Monday, a proposal by a bipartisan group of senators that would limit the scope of surveillance in the cryptocurrency industry ultimately failed.

The new proposal, which would have been an update to a provision of the Biden administration’s $ 550 billion infrastructure bill, would clarify the rules on who was considered a cryptocurrency broker and who should. report transactions to the Internal Revenue Service, being careful not to include other players in the crypto space like software developers or those who validate transactions in the new reporting requirements. The wording of this provision in the bill now excludes such clarifications, angering those in the cryptocurrency sectors and adjacent industries, including Square CEO Jack Dorsey.

“Regulation is probably more of a short-term slowdown,” Cryptograph co-founder Hugo McDonaugh told Yahoo Finance on Monday. “In the long run, regulating space makes sense.”

“I think they should spend a lot of time thinking about how to apply frames to this industry and not just trying to achieve one size fits all and put something last minute in a must have bill and try to ‘increase some system of supervision or regulation in this way,’ he added.

This article will be updated with the results of Coinbase’s second quarter results on Tuesday after the market closes. Check back for updates.

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck