Goldman Sachs Reveals Surprise Coinbase Prediction After $1 Trillion Bitcoin And Crypto Price Crash

Bitcoin and cryptocurrency prices have been on a roller coaster this year, crashing back after an April peak (subscribe now to Forbes’ CryptoAsset & Blockchain Advisor and discover crypto blockbusters poised for 1,000% gains).

The bitcoin price rally coincided with the Nasdaq-debut of major U.S. crypto exchange Coinbase, helping drive attention to the stock but failing to prevent it from falling along with the bitcoin price since April.

Now, ahead of Coinbase’s closely-watched second-quarter earnings report being released tomorrow, analysts at Wall Street giant Goldman Sachs have reiterated their “buy” rating for Coinbase—predicting even a lower bitcoin price could be good for its earnings.

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“Significantly elevated crypto asset volatility” caused a trading boom that will mean Coinbase takes in more in fees, the note to clients read. It was first reported by Coindesk. Analysts went on to predict the company could post earnings above market expectations as a result.

Goldman Sachs, which served as a financial adviser to Coinbase’s direct listing, pointed to one of its earlier analyst reports that claimed high fees would continue to flow into the exchange even if the bitcoin price falls further.

Coinbase’s stock price is currently down a third from its peak in April, with the stock pushed lower by the tanking bitcoin and crypto market that’s lost more than $1 trillion in value over the last few months. The crypto sell-off was sparked by China shutting down those that use powerful computers to secure bitcoin and crypto networks in the country, known as miners.

However, Coinbase fees may have suffered due to a significant decline in trading volumes across most major exchanges since the bitcoin and crypto price crash.

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Trading volumes at the largest exchanges, including Coinbase, Kraken, Binance and Bitstamp, fell more than 40% in June, analysis by data company CryptoCompare revealed this week. Spot trading volumes fell 42.7% from May to $2.7 trillion, with derivative volumes down 40.7% to $3.2 trillion, it was first reported by Reuters.

“The digital asset ecosystem got punched in the face, so it’s currently up against the ropes versus fighting in the middle of the ring,” Teddy Vallee, chief investment officer at Pervalle Global, told CNBC. “Typically when you have large sell-offs, participants are quite fearful and pull back their chips.”


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Triple-digit gains make Dogecoin and Ethereum Classic the top performers of Q2

In early 2021 Bitcoin and Ether price was the center of attention as each asset seemed to hit a new all-time high every 24-hours and traders called for $100,000 BTC and $5,000 ETH. Fast forward to the present and both assets are still more than 40% down from their all-time highs and the bulls calling for unbelievable price targets are nowhere to be found.    

A recent report from CoinMetrics reviewed the performance of Bitcoin and altcoins during Q2 2021 and the analysts found that even with the sharp May 19 market correction many assets finished the quarter in the green with Dogecoin (DOGE) coming out on top with a  392% gain.

Q2 2021 returns for the top 25 crypto assets. Source: CoinMetrics

Ethereum Classic (ETC) and Polygon (MATIC) were the other two breakaway stars of Q2, with each gaining 297% and 227% respectively despite a nearly 39% decline in the price of Bitcoin.

Ethereum network shows strength

One of the biggest developments during Q2 was the Ether price breakout from $1,971 on April 1 to a new record high of $4,362 on May 11 before the market-wide sell-off resulted in a quarterly close at $2,240, which represents a 13.2% gain.

CoinMetrics highlighted that Ether price “benefited from a renewed surge of retail interest which was partially driven by the rapid rise of NFTs.”

Number of Ethereum addresses holding at least 0.1 Ether. Source: CoinMetrics

As a result of the retail surge, the number of addresses holding at least 0.1 Ether increased from 4.58 million to more than 5.20 million.

Ether’s positive finish, when compared to the significant decline in Bitcoin, is also indicative of the increased attention the top-ranked altcoin is receiving from institutional investors looking to diversify away from BTC.

Altcoin gains triggered a decline in Bitcoin Dominance

As mentioned earlier, the best performance in Q2 came from DOGE, which managed to finish the quarter up 392% despite a 66% decline from its $0.74 all-time high set back on May 8.

Number of Dogecoin addresses holding at least 1 DOGE. Source: CoinMetrics

According to the report, the number of addresses holding at least 1 DOGE increased from 3.09 million on April 1 to 3.7 million addresses on June 30. DOGE addresses continued to increase in the month of June while new Ether addresses essentially flatlined at the end of May.

As a result of the gains made by altcoins, Bitcoin dominance fell to 45% on June 30, its lowest level since July 2018.

Bitcoin dominance. Source: CoinMetrics

CoinMetrics pointed out that the significant headwinds BTC faced were partially a result of China’s crackdown on cryptocurrency mining, which resulted in a 50% decline in hash rate in Q2 to its lowest level since late 2019.

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This decline is likely temporary and the hash rate “should eventually recover once miners start to power back up in their new locations,” but CoinMetrics warned that this “won’t happen overnight since it will take time to build and set up enough facilities to accommodate the sudden influx of new demand.”

Overall, CoinMetrics and other analysts see the development as a long-term positive development for the Bitcoin ecosystem headed forward.

CoinMetrics said:

“Over the long-term this mass migration should be largely beneficial as it will help Bitcoin hash rate get further distributed around the world, and remove the previous concentration in China. It could also help improve Bitcoin’s environmental impact since miners in some regions of China relied on coal.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.