Bloomberg — Coinbase Global Inc.’s (COIN) market for non-fungible tokens (NFTs) has finally arrived in what could be key to reviving the cryptocurrency platform’s growth prospects a year after its public debut.
A test version of its long-awaited platform — designed to sell digital art property and possibly other items — was unveiled Wednesday in the company’s latest attempt to diversify its revenue and bring more predictability to the business.
When Coinbase went public a year ago, investors had high hopes for a growth story. But with sales expansion expected to turn from triple digits in 2021 to negative this year, stocks have sunk to an all-time low recently.
NFT’s social marketplace (which will allow users to transact, like, and comment on images, similar to Instagram) will enter a crowded field six months after the original announcement. Many other cryptocurrency exchanges and platforms, such as Binance and FTX, have already launched similar markets. Furthermore, the NFT hype itself is cooling off. Sales on OpenSea, the world’s largest NFT marketplace, are down 67% in the last 30 daysaccording to tracker DappRadar.
Coinbase will need the platform to be a success as it looks to reduce its reliance on transaction fees, which are subject to the whims of retail investors who have more recently stayed on the sidelines after cryptocurrency prices plunged. from its highs last year. At the end of 2021, around 86% of Coinbase’s revenue came from transaction fees. The platform has some 89 million registered users to whom it could promote the new service.
Many believe that Coinbase will be able to expand into NFTs, but perhaps not as quickly as they hoped last fall. The platform may be “too little, too late,” according to Dan Dolev, managing director of Mizuho Securities. “I don’t think this is a big, promising thing,” he said.
Sentiment towards Coinbase stock has changed a lot since the company made its debut nearly a year ago. As the largest cryptocurrency trading platform in the United States, its net income grew more than 500% in 2021. But since then the ride has been bumpy as Coinbase’s challenges have piled up.
The company faces increasing competition not only from cryptocurrency platforms, but also from online brokers like Robinhood. Its grand expansion plan in India (touted by CEO Brian Armstrong on a recent trip to Bengalore) was marred by a payment hurdle. And analysts are now forecasting a drop in adjusted earnings this year, according to data compiled by Bloomberg.
The stock has plunged nearly 50% since the close of its first day of trading, and while it has mostly moved in tandem with bitcoin (XBT) prices, investors would have been better off buying bitcoin in cash. The shares fell 3.6% on Wednesday.
“Equity analysts don’t believe that Coinbase is capable of generating significant non-trading income,” Jeff Dorman, chief investment officer at Arca, said in an interview. He thinks they are wrong. “Obviously, the current valuation makes no sense. Fundamentally, it’s the cheapest stock in the world.”
The NFT market has grown tremendously in the last year, with many believing that everything from house deeds to club memberships will become an NFT, creating a massive market. But expectations for Coinbase’s new NFT business have tempered since it was first announced.
“I don’t think the waiting list is going to be as excited about NFTs as it was six months ago,” Chris Brendler, an analyst at DA Davidson, said in an interview. Coinbase has 2.5 million email addresses on its waiting list, although some of them could be duplicates.
Looking at the future
Despite the challenges, Coinbase is investing heavily in the pursuit of growth. His previous efforts to diversify income have included his so-called stake, which allow users to earn a return on their coins. But In a recent letter to investors, the company said it could slow its investments if there is a significant drop in sales, so that losses do not exceed $500 million this year. Its venture arm is one of the most prolific in the industry, with nearly 150 deals last year.
“We’re not always going to be first to market,” said Alesia Haas, chief financial officer, during the February earnings call. “But once we see customer demand, we’re going to quickly move on and make sure we can harness the strength of our platform.”
This article was translated by Estefanía Salinas Concha.