Coinbase’s crypto journey hit a snag today as Compass Point downgraded the exchange’s stock to a sell rating. The investment firm slashed its year-end price target from $330 to $248, highlighting disappointing earnings and dwindling interest in crypto equities as primary concerns. As of Monday, COIN was trading slightly up at $316, despite last week’s staggering 18% drop post-earnings.
Earnings Miss and Market Dynamics
Coinbase’s latest quarterly earnings failed to meet Wall Street’s expectations, and the early indicators for the third quarter aren’t looking promising. Subscription and services revenue—a crucial metric for investors hoping for a stable income source—fell short by 8% of analyst predictions in Q2. The company’s Q3 forecast midpoint is also lagging, sitting 5% below consensus. According to Compass Point, these shortfalls were driven by a notable dip in “Other S&S revenue,” particularly from Coinbase One and other tech-related fees. Investors had pinned hopes on these segments for long-term growth.
“The current crypto cycle is still constructive, but we anticipate a volatile third quarter,” analysts noted, pointing out weak August and September seasonality and decreasing retail interest in crypto treasury stocks. They also foresee rising stablecoin competition impacting Coinbase and Circle’s valuations in the second half of 2025. As explored in Coinbase Pushes Toward ‘Everything Exchange’ with Bitcoin Buy and Tokenized Assets, Coinbase’s strategic moves to diversify its offerings could be pivotal in navigating these challenges.
Crypto Market Headwinds
The downgrade comes amid a broader slowdown in the crypto market. Despite a recovery in the stock markets after last week’s slump, major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) have struggled to gain traction. Retail investors are seemingly retreating from TreasuryCo stocks—firms holding significant amounts of BTC or other digital assets on their balance sheets. This trend is evident in Coinbase and Strategy (MSTR), the latter of which has cooled its bitcoin buying spree, opting instead to raise funds through preferred equity rather than stock offerings.
Elevated leverage in the crypto markets presents another looming threat. July’s rally was powered by aggressive trading, but as open interest rebounds following a brief dip in liquidations, there’s a risk of a deeper sell-off triggering further forced selling. Despite weak Q2 results, COIN shares soared 56% from May to July. However, Compass Point warns that COIN is currently trading at 44 times the annualized 3Q25E Street EBITDA forecast—a valuation deemed excessive given the headwinds in retail trading, competition from ETFs and DeFi, and limited near-term regulatory breakthroughs.
Regulatory Hurdles and Strategic Shifts
Adding to the uncertainty, Compass Point expressed skepticism about the passage of the CLARITY Act—a bill considered pivotal for regulatory reform—in 2025. “We’re more skeptical towards a market structure bill passing this year,” they stated, projecting potential movement in early 2026 instead.
Coinbase has floated the idea of offering stock trading to its users. Yet, analysts remain unconvinced about its potential as a significant revenue stream, especially with established players like Robinhood already dominating the space. “Under a backdrop of weak crypto performance, we see COIN’s premium valuation compressing back towards its prior range,” the report concluded. This follows a pattern of institutional adoption, which we detailed in Coinbase, JPMorgan Deal Signals Shift in Institutional Posture Towards Crypto: Bernstein.
Going forward, Coinbase faces a landscape filled with both challenges and opportunities. As investors navigate these choppy waters, the question remains: can Coinbase recalibrate its strategy to weather the storm and emerge stronger on the other side? The coming months will be telling, as market dynamics, regulatory developments, and strategic pivots converge to shape the future of this crypto powerhouse.
Source
This article is based on: Coinbase Crypto Momentum Stalls, Valuation Stretches: Cut to Sell at Compass Point
Further Reading
Deepen your understanding with these related articles:
- JPMorgan & Coinbase Team Up: Crypto From Points, Bank-Linked Wallets Coming
- Bitcoin Miner MARA Is Missing Out on AI Boom: Compass Point
- Strategy Stock Price Could Nearly Double as Bitcoin Treasury Aims to Dominate Market: Benchmark
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
