Coinbase (COIN), the U.S.’ largest cryptocurrency exchange, reports first-quarter earnings after the close today — the first quarterly results since its IPO last month — after investing in Bitcoin took off last year. Coinbase stock fell.
The company reports as the past week has shown how fickle interest in Bitcoin can be. On Wednesday, Tesla (TSLA) CEO Elon Musk, one of Bitcoin’s most prominent backers on Twitter, said the electric-car maker would suspend vehicle purchases using Bitcoin.
Estimates: Wall Street expects Coinbase to earn $3.07 a share on revenue of $1.81 billion, roughly in line with the crypto exchange’s own forecasts.
Coinbase, in April, said it expected 56 million verified users and monthly transacting users of 6.1 million.
Results: Due after the close.
Coinbase’s fortunes hinge on people’s interest in investing in Bitcoin and other cryptocurrencies. The exchange, which makes most of its money from transaction fees on its platform, has warned that demand trends are “inherently unpredictable” due to the volatility in crypto prices.
For the full year, Coinbase offered three forecasts, ranging from 4 million to 7 million, for the number of its average monthly transacting users, depending on the value and interest in cryptocurrencies.
Meanwhile, regulators remain cautious on cryptocurrencies, and could further crack down on an industry where fraud and theft remain big concerns. There are also concerns about the amount of energy Bitcoin burns.
If investing in Bitcoin continues to grow, Coinbase could face more competition. Block.one, a blockchain software company backed by billionaire investor Peter Thiel, said it plans to introduce a new cryptocurrency exchange this year.
The price of Bitcoin fell 11% to $50,636 Thursday. The Grayscale Bitcoin Trust (GBTC) dropped 6%. MicroStrategy (MSTR), which announced it’s buying another $15 million in Bitcoin, lost 5%. Last month, MicroStrategy reported its Bitcoin holdings were worth more than $5 billion as of April 28.
Coinbase reports after interest in Bitcoin and other cryptocurrencies grew at a maniacal pace over the past year, helped by adoption by bigger investors and corporations, as well as digital assets like NFTs and the joke cryptocurrency Dogecoin.
Digital-payments giant PayPal (PYPL) allows users to buy and sell the cryptocurrency. Mastercard (MA) said it would support cryptocurrency payments on its network this year. Tesla bought $1.5 billion in Bitcoin earlier this year.
The uptick in investing in Bitcoin has also been attributed to growing interest in alternative currencies following an infusion of coronavirus stimulus aid, which weakened the dollar.
Musk Says Bitcoin Energy Use Is ‘Insane’
The Tesla CEO, who has regularly tweeted about Bitcoin and joked about Dogecoin, said in a tweet on Wednesday that Tesla had suspended vehicle purchases using Bitcoin — just weeks after allowing the purchases. Musk cited concerns about “rapidly increasing use of fossil fuels for Bitcoin mining and transactions.”
He also said Tesla would not be selling any Bitcoin, and would use it for transactions “as soon as (Bitcoin) mining transitions to more sustainable energy.” Musk said Tesla was looking at other cryptocurrencies that use less than 1% of Bitcoin’s energy in transactions.
In a tweet on Thursday, Musk said Bitcoin’s energy use over the past few months was “insane.”
Digiconomist estimates that Bitcoin’s annualized total carbon footprint is equivalent to that of Singapore.
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