Shalini Nagarajan

<div id="highlights-block_62bade286c2a8" class="highlights">
 <ul>
 <li>Goldman Sachs analysts lowered their Coinbase price target from $70 to $45</li>
 <li>The Wall Street bank expects Coinbase to make further staff cuts</li>
 </ul>
 
</div>



Coinbase stock fell more than 10% on Monday after Goldman Sachs downgraded it to a sell, citing potential for large revenue drops this year.



Goldman analysts, led by Will Nance, said in a research note that current cryptocurrency prices and trading volumes indicate further declines in Coinbase income. 



Coinbase has historically generated more than 90% of its revenue from trading fees.



The analysts expect Coinbase&#8217;s revenue to fall 61% year on year in 2022 and by 73% in the second half of the year alone, as the soured macro outlook continues to inflict pain on industry heavyweights.



Goldman’s latest rating lowers its price target for Coinbase from $70 a share to $45. The top US exchange&#8217;s stock was worth around $56 during pre-market trade on Tuesday, having recovered 1% from Monday&#8217;s losses.



If Goldman analysts are on point, Coinbase could see its share price shed another 20% from here.



Coinbase recently said it would <a href="https://cms.blockworks.co/coinbase-cut-workforce-ceo-wary-of-potential-recession/" target="_blank" rel="noreferrer noopener">slash its workforce by 18%</a> — or 1,100 employees — in anticipation of a US recession. The company warned its trading revenue could be hurt by the crypto winter, a period marked by an extended downturn across digital assets.



Goldman expects Coinbase to make further staff cuts as its layoffs thus far only bring its headcount back to where the company was at the end of this year’s first quarter. 



The Wall Street mainstay&#8217;s analysts reckon Coinbase must &#8220;make substantial reductions in its cost base&#8221; to stymie its cash burn as &#8220;retail trading activity dries up.&#8221;



Goldman is also bearish on Coinbase’s decision to sunset its professional trader-focused platform and <a href="https://cms.blockworks.co/coinbase-to-replace-its-pro-service-and-buddle-it-under-one-roof/" target="_blank" rel="noreferrer noopener">unify all trading</a> into a single application.



“We believe that combining these platforms will reduce switching cost friction between the two platforms and potentially lead to fee rate compression,” the analysts said.



Coinbase’s stock has drifted downward ever since it went public in April 2021 at a valuation of more than $86 billion. The company’s market value is now under $12.5 billion, having collapsed 85% since its direct listing.


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Coinbase Stock Tumbles as Goldman Sachs Cuts Rating to ‘Sell’

Casey Wagner

<div id="highlights-block_61f0284cec47a" class="highlights">
 <ul>
 <li>Federal Reserve policy makers meet this week as markets reel and inflation rises </li>
 <li>Bitcoin’s rising correlation to equities could mean a further pullback in coming days</li>
 </ul>
 
</div>



Cryptocurrency market participants are closely watching a Tuesday meeting of the Federal Reserve as rising concerns over stimulus pullback and heightened inflation have sent equity and digital assets markets reeling.&nbsp;



Analysts anticipate interest rate increases starting in March, and this week’s policy-setting meeting may confirm the suspicion.&nbsp;



“The Wednesday Fed meeting will be critical, and we don’t expect recent market volatility to have softened Chairman Jerome Powell’s stance on rates and balance sheet runoff,” said Nicholas Colas, co-founder of DataTrek Research.&nbsp;



The meeting of the Federal Open Market Committee (FOMC) comes as the correlation between bitcoin and equities <a href="https://cms.blockworks.co/january-effect-bitcoin-tightens-correlation-with-sp-500/" target="_blank" rel="noreferrer noopener">continues to tighten</a>. 



<div class="wp-block-image"><figure class="aligncenter is-resized"><img loading="lazy" decoding="async" src="https://lh3.googleusercontent.com/L6ANG92oaWrpdzle--ExqNB472zpBkhzeUccNiY8oezeNkR6i6b-hFlvbJdCsdCZ96YslJSMVA_CycNNHGQhj3sksVfP3c_BFPJnxXs8gJ342ssDt1uDlCRetQy1dvmFEYfDEPc3" alt="" width="505" height="358"/></figure></div>



“While bitcoin has historically been uncorrelated to other asset classes, such as equities, bonds, and gold, since March 2020, bitcoin’s rolling 90-day correlation to US equities has been consistently positive,” NYDIG researchers Greg Cipolaro and Ethan Kochav wrote in a recent note. “In the tighter monetary policy era of the past few months, those correlations have increased, as bitcoin has fallen in sympathy with other risk assets.”



Powell has made it clear that the Fed plans on putting its easy money policy days behind it in 2022. 



“It really is time for us to begin to move away from those emergency pandemic settings to a more normal level,” Powell said during congressional testimony earlier this month. “2022 will be the year in which we take steps toward normalization.”



The Fed Funds Futures shifted predictions for rate policy in 2022, now anticipating a Fed Funds rate of 1.0% 12 months from now. This is an increase from the current target of 0.0% &#8211; 0.25%. The probability of three rate hikes in 2022 increased to 25.5%, up from 23.5% on Friday.&nbsp;



But a rocky start to the year – the S&amp;P 500 is down more than 10% year-to-date – has some analysts wondering if the Fed will opt for a more dovish stance.&nbsp;



“If, in the statement, the Fed does not insert language that says, ‘it will soon be appropriate to alter/adjust policy,’ then the market will take that as a signal that rates might not rise until May or June, and that would cause a powerfully dovish response, given markets have priced in a March hike,” said Tom Essaye, founder of Sevens Report Research. 



The two-day meeting kicked off Tuesday. Central bankers will reveal policy decisions Wednesday.&nbsp;&nbsp;



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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