$600 million Q4 loss forecast for Coinbase

With its Q4 report, Crypto Giant Coinbase hopes to astound investors by disclosing a staggering loss of about $600 million. This would be the fourth consecutive quarter of drop in revenue.

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It happens at a time when CEO Brian Armstrong is engaged in a protracted legal dispute with US regulators over cryptocurrency custody, staking, and the security of stablecoins, posing a risk to the company's financial stability.

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Because of its reliance on trading fees, Coinbase has been forced to look at new revenue sources in order to weather the regulatory storm.

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The crypto behemoth may need to reduce expenses despite forecasts for more revenue in Q1 given that it plans to lose no more than $500 million in adjusted earnings before taxes in 2022.

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Even yet, Coinbase should be able to withstand the crypto winter because it has $5 billion in cash and equivalents at the end of September.

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The decrease in crypto prices has drove away many of Coinbase's primary customers, retail traders, leading to the lowest selling since late 2020.

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Aside from that, there has been a rise in regulatory hurdles since the collapse of the rival exchange FTX in November, which has placed analysts on edge because regulators are intensifying their scrutiny of digital assets. Despite the growing uncertainty in the market, a series of federal agencies have been intensifying their crackdown on crypto products, services, and companies in recent weeks.

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Although it is evident that the regulatory environment is uncertain for Coinbase, Compass Point analyst Chase White is optimistic regarding the company's future. According to him, when the cryptocurrency bull market returns in the US, he believes the cryptocurrency exchange will gain market share among retail investors, especially if the cryptocurrency market sees a surge in activity over the next year.

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While Kenneth B. Worthington, an analyst at JPMorgan, claims the risk of regulatory enforcement enforcing the regulations in digital-focused businesses is greater, he is more cautious. Even though Coinbase's subscription service business has evolved to be one that is more stable and resistant to crypto market volatility, recent actions by the Securities and Exchange Commission have put a number of its components at risk.

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