Investment bank Goldman Sachs on Monday downgraded its rating on crypto exchange Coinbase, now recommending that traders sell the stock.
Goldman Sachs downgraded its rating on Coinbase to “Sell” from “neutral,” and also cut its price target on the stock to $45 from $70, in a recent research note. Shares of the firm fell 5.1% in premarket trade to $59.50.
The investment bank‘s change of tone on Coinbase comes in the wake of the worst bear market experienced by crypto. A downturn in the crypto market has heavily dented the exchange’s operations, which saw it report a massive loss in the first quarter.
Crypto crash dents Coinbases prospects
Goldman Sachs analysts attributed the downgrade to the recent crash in crypto markets, which has pulled down token prices and weighed on trading volumes.
The investment bank said that it now sees an extend crypto downturn further impacting the companys prospects, and expects its revenue to slump by about 61% in 2022.
A bulk of Coinbases revenues come from the fees it earns from retail traders. This class of traders has been the worst hit by the crypto downturn, with rising U.S. inflation also weighing on their pockets.
The exchange recently cut about 18% of its workforce, citing growing costs and dwindling revenue streams. Earlier this month, short-selling veteran Jim Chanos warned that Coinbases revenue was set for more declines as lower trading volumes would impact its margins.
Coinbase attempts to branch out of exchange trading have also been met with a middling response. The firms recently launched NFT marketplace saw little over $1 million in sales in a month since its launch.
Several other exchanges hit by the crash
Coinbase isnt alone in its struggles- the crypto crash has seen several major firms in the space attempt to reduce costs.
Crypto.com and Gemini both recent reduced their headcount. Lenders such as BlockFi and Celsius are facing a severe liquidity crunch, with the latter now likely headed for bankruptcy proceedings.
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