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An investment research firm predicts a drop in Coinbase’s revenue despite exceeding expectations

New Constructs’ CEO warns Coinbase investors to be on their guard. It predicts that the company won’t continue to generate “blowout profitability” in the future, as it has in the past.

Coinbase beats forecasts

Coinbase beat analysts’ forecasts on transaction revenue on Tuesday. Despite that, a U.S. investment research company still believes the biggest U.S. crypto exchange is overvalued.

CoinExchange, the largest U.S. cryptocurrency exchange by trading volume, posted transaction revenue of $1.9 billion for the second quarter.

Trainer’s Statement

According to David Trainer, CEO of New Constructs, its outstanding achievements are insufficient to support its $56 billion valuations.

“Coinbase will likely not be able to sustain blowout earnings going forward thanks to rising competition in the cryptocurrency trading space,” said Trainer. As such, New Constructs expects the exchange’s margins and future revenue growth rates to fall as competition from the likes of Binance, Gemini, and Kraken “eat into its business.”

It’s not the first time the research company has questioned Coinbase’s value. According to the firm’s projection, the United States exchange’s share price plummets to $100 by the end of May. After hitting a record low of $208 on May 19, Coinbase’s stock price recovers. Additionally, it is now trading at about $269 per share.

Trainer’s Warning

As a result of regulatory changes and politicians’ desire for a tax cut, Trainer warns Coinbase investors to be on their guard.

“At current levels, Coinbase’s stock remains terribly overvalued,” believes Trainer, who points Coinbase to attain higher revenue. Therefore to compete with the established rivals like Nasdaq (NDAQ) and Intercontinental Exchange (ICE).

Coinbase’s Revenue Growth

Coinbase’s transaction revenue growth is also dependent on the current price of bitcoin, according to the CEO. The CEO notes that the exchange’s share price moves up and down with bitcoin values.

The exchange has cautioned that monthly transacting users and trading volume will be lower in Q3 than Q2. This is due to bitcoin’s weak performance in the second half of 2018.

“Hints of lower volumes in Q3 coupled with July’s crypto market volatility has led to a mild retracement to the US$270 level,” said Toby Chapple, head of trading at digital asset firm Zerocap, to CoinDesk via Telegram.

The digital asset business said Coinbase’s income is spreading into other cryptos, helping to catch thematic decentralised finance flows, despite reduced forecasts for Q3.

As a result of Ethereum’s supply changes and traders’ and investors’ projected sentiment increase, Chapple expects a high share price for the rest of the month.

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