The Crypto Winter Could Reduce Fintech Revenue 2022

The Crypto Winter Could Reduce Fintech Revenue 2022

  • Fintech
  • August 4, 2022
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Wall Street Cuts Earnings Expectations for Fintech Coinbase and Block Due to Market Volatility

Wall Street lowered earnings forecasts for fintech firm Coinbase and Block as the cold in the crypto market adds more pain to companies already struggling with rapidly rising costs and prices.

Cryptocurrency exchange Coinbase is expected to report an adjusted loss in the second quarter, while the Jack Dorsey-led payments company is likely to report a 70% drop in adjusted earnings.

Coinbase, which has the largest exposure to crypto fluctuations, has lost more than three-quarters of its market value this year.

“For Coinbase, this is going to be a very tough 12-18 months,” said Dan Dolev, chief equity research analyst at Mizuho Securities USA.

Block, which changed its name from Square last year to better reflect its focus on blockchain, has lost more than half of its market capitalization amid the stock market’s rout this year.

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Context

The sale of cryptocurrencies has caused a decrease in the number of companies in this sector, some of which are even seeking bankruptcy protection. Bitcoin, the largest cryptocurrency, nearly halved in value in the first seven months of the year.

“There may be a chance of a double-digit count (on Coinbase) at some point because the cost is too high,” Dolev said.

According to analysts at Credit Suisse, valuation downgrades and competitive pressures are also contributing to the weakness in fintech stocks.

The cryptocurrency sector may slowly emerge from a sell-off, but it still faces regulatory hurdles in the United States, the largest market for such assets.

Online trading app Robinhood Markets Inc reported a 44% drop in second-quarter profit on Tuesday, a day earlier than expected, and said it would also cut 23% of its workforce.

Coinbase Global: 14 of 26 brokerages rated the stock “Buy” or higher, 10 “Hold” and 2 “Sell”; Average PT is $91, down from $100 last month

Block Inc: 37 of 50 brokerages rate the stock as “buy” or higher, 11 “hold” and two “sell”; His PT averaged $117, down from $140 last month.

Wall Street lowered earnings forecasts for fintech firm Coinbase and Block as the cold in the crypto market adds more pain to companies already struggling with rapidly rising costs and prices.

Cryptocurrency exchange Coinbase is expected to report an adjusted loss in the second quarter, while the Jack Dorsey-led payments company is likely to report a 70% drop in adjusted earnings.

Coinbase, which has the largest exposure to crypto fluctuations, has lost more than three-quarters of its market value this year.

“For Coinbase, this is going to be a very tough 12-18 months,” said Dan Dolev, chief equity research analyst at Mizuho Securities USA.

Block, which changed its name from Square last year to better reflect its focus on blockchain, has lost more than half of its market capitalization amid the stock market’s rout this year.

The sale of cryptocurrencies has caused a decrease in the number of companies in this sector, some of which are even seeking bankruptcy protection. Bitcoin, the largest cryptocurrency, nearly halved in value in the first seven months of the year.

“There may be a chance of a double-digit count (on Coinbase) at some point because the cost is too high,” Dolev said.

According to analysts at Credit Suisse, valuation downgrades and competitive pressures are also contributing to the weakness in fintech stocks.

The cryptocurrency sector may slowly emerge from a sell-off, but it still faces regulatory hurdles in the United States, the largest market for such assets.

Online trading app Robinhood Markets Inc reported a 44% drop in second-quarter profit on Tuesday, a day earlier than expected, and said it would also cut 23% of its workforce.

Coinbase Global: 14 of 26 brokerages rated the stock “Buy” or higher, 10 “Hold” and 2 “Sell”; Average PT is $91, down from $100 last month

Block Inc: 37 of 50 brokerages rate the stock as “buy” or higher, 11 “hold” and two “sell”; His PT averaged $117, down from $140 last month.

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