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Coinbase's need for crypto diversification

Third-party web traffic data suggests U.S. crypto exchange giant Coinbase is set to report a notable slowdown in its upcoming first quarter earnings report.

Why it matters: Coinbase's valuation will reflect on private market crypto companies, even if funding is keeping startup valuations in the space aloft for now.

The details: According to data from SimilarWeb, desktop and mobile web traffic to Coinbase fell 26% in the first quarter compared to the same period a year earlier.

  • App installs also fell, suggesting a slowdown in new users. SimilarWeb estimates unique installs in March 2022 clocked in at 714,000, compared to 2.2 million in April 2021.

Of course, third-party traffic data is far from a perfect replacement for earnings figures, with companies often cross-selling products to a single customer.

  • But the lion's share of Coinbase's revenue comes from crypto trading, which has historically been tied to the up-and-downs of the price of major cryptocurrencies like bitcoin.

And Wall Street analysts seem to agree that a slowdown is coming. Those polled by S&P Capital IQ expect Coinbase to post:

  • $1.5 billion in revenue for the first quarter and a loss-per-share of about 25 cents — a drop of roughly 16% and over 100% respectively.

The key now for Coinbase is diversification, something CFO Alesia Haas pointed to during the company's last earnings report. The crypto giant has headed into NFTs, for instance.

What to watch: Signs during the company's earning release on May 10 that its nascent business lines outside of trading are showing real promise, as well as the status of its international expansion.

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