The party may be over for Coinbase Global, Inc. (NASDAQ:COIN) investors, as a sharp decline in crypto trading activity is casting a shadow over the company’s record-high stock price.
With the second-quarter earnings report scheduled for July 31, market observers are sounding alarms that results could substantially disappoint expectations, potentially triggering a significant shift in investment sentiment.
Analyst Sounds Alarm
In a move reflecting these concerns, HC Wainwright & Co. analyst Mike Colonnese downgraded Coinbase Global from Buy to Sell on Thursday, adjusting his price forecast from $305 to $300.
Also Read: Coinbase Becomes First Pure-Play Crypto Stock In S&P 500, Analyst Sees Major Institutional Upside
Despite recognizing Coinbase as a premier crypto exchange and maintaining an optimistic view on the broader crypto sector, Colonnese contends that the stock’s remarkable nearly 150% surge since its April lows, a stark contrast to the Nasdaq’s 35% rise, has inflated its valuation beyond what near-term fundamentals justify.
Riding the Stablecoin Wave: Circle IPO and GENIUS Act Boost
The analyst attributes part of this recent momentum to the excitement generated by Circle Internet Group’s (NYSE:CRCL) highly anticipated IPO on June 5.
Investors were particularly drawn to Coinbase’s significant revenue stream, deriving over half of all reserve income from USDC, Circle’s flagship stablecoin, which boasts a market capitalization of approximately $62 billion.
This positive sentiment was further amplified when the U.S. Senate passed the GENIUS Act, crucial stablecoin legislation, less than two weeks later on June 17.
Profit-Taking Advised: Anticipating Disappointing Q2 Results
However, with Coinbase now trading at all-time highs amidst a sharp downturn in overall crypto trading activity, Colonnese advises investors to capitalize on this opportune moment to secure profits before the company’s second-quarter earnings report.
He specifically warned that the upcoming results could fall short of consensus, citing his revised second-quarter 2025 revenue forecast, which sits 10% below current market expectations.
Transaction Revenue Woes
Colonnese highlighted a downside risk to current Wall Street estimates, which project $900.1 million in transaction revenue and $1.67 billion in total revenue.
He anticipates a significant drop in total spot trading volume on centralized exchanges during the second quarter, pointing to CCData figures that show only $3.8 trillion in volume for April and May combined, a substantial decrease from approximately $7.2 trillion in the first quarter.
This decline is further evidenced by Coinbase’s own total spot trading volume, which, according to data from The Block (June) and CCData (April and May), plunged 41% quarter-over-quarter in the second quarter, falling to $232 billion from $393 billion in the first quarter.
Considering these mid-quarter trading volume trends and a slight compression in the average blended take rate to 32 basis points from 30 basis points in the first quarter, an adjustment reflecting Coinbase’s recent shift to more competitive fee structures for active retail traders, Colonnese projected second-quarter total transaction revenue at $705.4 million, approximately 22% below the Street consensus.
Subscription and Services: A Brighter Spot
Conversely, Colonnese expects Coinbase to surpass its second-quarter Subscription and Services revenue guidance of $600 million to $680 million.
This optimism is fueled by a 13% quarter-over-quarter increase in USDC’s average market cap and a rebound in ETH prices following management’s May 8 earnings call.
He forecasts robust sequential growth in stablecoin revenue, attributing it to steady reserve rates and the higher average USDC market cap.
However, he anticipates a quarter-over-quarter drop in reported blockchain rewards, primarily driven by average ETH and SOL price declines of 18% and 17%, respectively, alongside a slight dip in ETH staking rates to about 3.0%.
Despite the expected decline in Blockchain rewards, Colonnese believes that rising stablecoin revenues, which are the main contributor to Subscription and Services revenue, will more than offset this impact.
He also foresees modest support from higher custodial fee income, spurred by a 6% quarter-over-quarter increase in average Bitcoin (CRYPTO: BTC/USD) prices.
Consequently, he projected total Subscription and Services revenue at $711.8 million for the second quarter, roughly 4% above the Street consensus of $687.6 million.
Revised Financial Outlook
However, reflecting the overall weaker trading volumes and lower transaction fee rates, Colonnese ultimately lowered his second-quarter 2025 total revenue estimate to $1.49 billion from $1.56 billion.
While stronger subscription and services revenue did help mitigate some of the impact, he still reduced his second-quarter adjusted EBITDA forecast to $516.3 million from $538.1 million and trimmed his adjusted EPS estimate to 72 cents from 82 cents.
For the full year, he further cut his total revenue projection to $6.8 billion from $7.4 billion, with adjusted EBITDA lowered to $2.6 billion from $3.1 billion and EPS cut to $4.43 from $5.92.
COIN Price Action: Coinbase stock is trading higher by 1.33% to $378.90 at last check Thursday.
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