Coinbase hasn’t been doing very well lately. They have posted a net loss of $1.1 billion in Q2 2022, which shows they are burning cash right now. In the past, the company said that they would be keeping cash in handy for the bear market. But the question is if they keep posting such huge losses will their cash holdings be enough? Well, analyst Lisa Ellis, a partner with MoffettNathanson, says that Coinbase can easily survive this bear market. This statement was made after they took a closer look at the company’s balance sheet.
Coinbase can get through this
With the rising prices of crypto and Coinbase’s cash reserves, this bear market shall not be a problem. They have also been cutting down expenses by laying-off employees and ensuring that only the bare minimum is being spent on operations. During the Q2 earnings call, it was clear that Coinbase has a total of $6.2 billion in cash reserves which includes $500 million in USDC stablecoin. That in itself could get them through more than 5 quarters of heavy losses like Q2 2022.
However, it feels like things are going to get better from here on. Coinbase recently said in one of its newsletters that the Q2 2022 was a durability test for platforms. So, those who made it through are likely to get through the bear market as well.
For Coinbase, things look simple as Ellis pointed out that Coinbase is expected to burn $200 million per quarter from here on. That means their cash holdings are more than enough to get them through a long bear market as well. And even after that, most of their cash would be there.
The company’s shares are trading near $84 right now, and analysts are giving a target of $90-$100 very soon. Considering the prices of crypto are on the rise and the exchange, in general, is in a good state, it is quite plausible. For investors looking to create a position on Coinbase stocks, it looks like a good time. However, please do your own research before making an investment. I am personally positive about Coinbase’s future.
What are your thoughts as analysts say that Coinbase can easily survive this bear market? And do you think their quarter burn will fall to $200 million? Let us know in the comments below. And, if you found our content informative, do share it with your friends.