Summary: The last test of the highly anticipated Ethereum merge was a success. The real merge has now been scheduled for either the 15th or 16th of September. Whereas the latter was a success, Coinbase’s Q2 result was arguably not a success compared to the market’s consensus.
On Thursday, the final public test of the highly anticipated Ethereum merge occurred successfully as the test network known as Görli successfully adopted a proof-of-stake framework. One day later, the developers of Ethereum announced that the real merge is likely to take place on either the 15th or 16th of September next month. This is in line with what we estimated earlier this month, assigning a 95% chance of a merge in September in case Görli occurred flawlessly, as it did. This means that one of the most significant events in the history of crypto is only around a month away.
It seems that traders are likewise anticipating the merge. Ethereum hit a local high against Bitcoin since January of 0.0816 (ETHBTC) this weekend alongside hitting a new 3-month high in dollar terms of over $2,000. This is rather remarkable because Ethereum has previously decreased against Bitcoin during bear markets with Bitcoin behaving somewhat as a safe haven within the highly speculative crypto market. At present, the pair trades at 0.0793.
On Tuesday, the largest US-based crypto exchange NASDAQ-listed Coinbase reported its second quarter result. The result was, however, not encouraging for shareholders. The company’s revenue declined by nearly 64% compared to the same quarter last year, while the company noted a loss accurately exceeding $1bn. Yet, $377mn of that was caused by depreciating its crypto holdings, with the latter taking a severe hit during the quarter. Coinbase laid off around 18% of its workforce in Q2 while enforcing a hiring freeze. The major issue for Coinbase in Q2 and not least going forward is the fact that its retail trading has decreased substantially, although its volume from institutional clients is fairly more stable. The challenge with the latter is that Coinbase earns significantly less on institutional rather than retail trading. As a consequence, institutional clients’ volume is over three times as much but pays overall 15 times less in trading fees than retail clients. So, unless retail trading surges, the fundamental of Coinbase is likely not improving. Making matters worse, Coinbase is encountering further competition on retail trading from, for instance, Robinhood, potentially over time pushing Coinbase’s high margins on retail trading down.
Alongside 21 other companies, Coinbase is a part of our Crypto & Blockchain equity basket for investors wanting to get exposure to the crypto market through crypto-related companies (the basket should not be considered as a trade recommendation, only as an inspirational list).
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)