Only 5 exchanges will survive, Coinbase will be one of them

  • Rate cuts ‘sufficient for the foreseeable future’ based on current trading environment
  • Coinbase Could Be One Of The Few Survivors Of Crypto Winter
  • Bitcoin is highly correlated with the direction of interest rates

Oppenheimer Executive Director and Senior Analyst Owen Lau talk about How Coinbase’s latest layoff and the crypto exchange’s cost-cutting strategy are helping it survive in the broader crypto space.

Is the cut enough?

Coinbase recently laid off about 20% of its employees. Lau says:

For me, that’s enough for now based on the current trading environment, but in the long term I wouldn’t be surprised by further cuts.

Will this change the bullish Coinbase valuation?

Oppenheimer’s Coinbase rating is Outperform with a $72 target price. Lau said this would not change the rating.

If you believe in this technology, blockchain, etc., there will be survivors (of the crypto winter). Long term, we believe Coinbase will be one of the few survivors.

Why are you so bullish on Coinbase in particular? How many exchanges do you think will be left years from now?

Coinbase is a strong brand. #1 in the US. Second, there are regulations. It’s more compliant compared to many other platforms. In the long term, there will be fewer than 5 exchanges in the world and Coinbase will be one of them.

Bitcoin has been very volatile over the past few years, but is now stable at around $17,500. Do you think the Fed rate hike will increase volatility?

Bitcoin and other digital assets are highly correlated with the direction of interest rates. If the Federal Reserve stops raising interest rates or pivoting at the end of this year or next year, that should support the price of Bitcoin and other digital assets.

There are other fundamental reasons for optimism in this area. One of them is his Shanghai upgrade of Ethereum, scheduled for March 2023, allowing users to unstake her ETH. The other is the Bitcoin halving in March 2024.

What do you expect to see in the short-term trading behavior? Could it get very volatile?

I think trading is stable compared to 2021. Rising interest rates benefit Coinbase. They have entered into an agreement to share interest income with Circle, a large player in the stablecoin market. Coinbase will benefit from rising interest rates and will be able to offset some of the lost trades.

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