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JPMorgan estimates a substantial decline in Coinbase trading volumes and cut its rating on the exchange’s stock to neutral from overweight.
JPMorgan has cut its rating on Coinbase Global Inc (NASDAQ: COIN) stock to neutral from overweight. In addition, the leading multinational investment bank also slashed its price target for COIN to a comparatively measly $68 from $171. According to JP analysts, it would be challenging for Coinbase to generate a profit anytime soon.
JPMorgan’s move to downgrade the Coinbase stock comes as a result of the pervasive slump in the crypto market. Since the crypto exchange realizes a huge chunk of its revenue from the price value of crypto tokens, the recent downturn will be impactful. As a JPMorgan report states, it will likely have a “material negative impact on Coinbase revenue.”
According to JPMorgan, Coinbase’s trading volumes have declined more than 30% in the second quarter of 2022. This downswing follows the even bigger 40% slump in trading volumes recorded in Q1.
Amid JPMorgan COIN Rating Slash Coinbase Also Cuts Down Workforce Drastically
The bearish mood in the crypto market has also seen Coinbase abruptly cut down on its staff force by a massive 18%. In addition, the popular American crypto exchange also suspended the recruitment of new employees and rescinded some job offers. According to JPMorgan, this hiring stagnation could likely cease expense growth from mid-May.
In a message posted to Coinbase’s blog post, company CEO Brian Armstrong announced the “difficult decision” to cut down on staff. Armstrong highlighted rapidly changing economic conditions as a precipitating factor for the downsizing. According to the Coinbase CEO, “we appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period.”
Furthermore, Armstrong emphasized the need for the leading crypto exchange to remain operable “through any environment”. In addition, he referenced four other unsavory business periods that Coinbase was able to weather. Armstrong stated:
“… we’ve created long term success by carefully managing our spending through every down period. Down markets are challenging to navigate and require a different mindset.”
Coinbase CEO Opines Exchange “Over-hired”
Armstrong also explained that the Coinbase headcount grew too quickly and had a total of 1,250 employees as of early 2021. “It is now clear to me that we over-hired,” the crypto exchange CEO offered.
Coinbase is looking to shave off around 1,100 Coinbase employees, leaving 5,000 left as of the current quarter-ending. The CEO of the crypto exchange also stated that this downsizing would take effect by the end of Q2. He also announced that terminated employees would receive emails from the company informing them of such. According to Armstrong, this is so because all affected staff would immediately lose access to Coinbase’s systems. However, the company’s chief executive added that all employees who lost their jobs would receive assistance from Coinbase. This includes support in finding a new role as well as other palliative packages.