Due to the recent decline in crypto prices and the industry’s inactivity, Goldman Sachs downgraded Coinbase Global, Inc, one of the most prominent cryptocurrency exchange platforms.
After weeks of a downward spiral in the crypto sphere, analysts at the bank, led by Will Nance, decided to cut Coinbase. The price target was lowered from $70 to $45, noting “Coinbase’s price per share was at $220 when Goldman initiated price coverage” a huge drop since.
“We believe current crypto asset levels and trading volumes imply further degradation in Coinbase’s revenue base, which we see falling ~61% year-over-year in 2022, and ~73% in the back half of the year,” read the report.
Over the past month, Coinbase has laid off 1,100 employees, cutting 18% of its staff.
Brain Armstrong,CEO of Coinbase, said it was a difficult decision to make but necessary “to stay healthy during this economic downturn” admitting they had over-hired. He also anticipated spending between $40 and 45 million dollars to restructure the company.
Despite this, Goldman Sachs analysts don’t believe it will be enough.
According to the report, Coinbase needs to reduce its costs significantly to be able to “stem the cash burn” resulting from slow retail trading activity, to survive. As the market has entered what many call the new crypto winter, Goldman analysts believe Coinbase faces dilution from shareholders and an inability to adjust the appropriate compensation to talent, potentially adversely affecting employee retention.