Oops, There Goes the Honeymoon: Wall Street Slashes Crypto's Q1 Profit Forecast

Major investment firms are preemptively downgrading Coinbase and other crypto platforms as trading activity and token prices have dropped sharply, threatening first-quarter earnings results. The honeymoon phase is officially over, and Wall Street is filing for divorce papers before anyone gets hurt.

Wall Street analysts are cutting forecasts as trading volumes and token prices slump to their weakest levels since late 2023. Barclays downgraded Coinbase and now expects significantly lower profitability, while Oppenheimer trimmed its volume and revenue estimates but remains relatively more optimistic. "Relatively more optimistic" is analyst speak for "we still like this stock but please don't sue us."

Pockets of strength in stablecoins and newer businesses like derivatives and tokenized assets have yet to offset the slowdown in core trading, prompting analysts to reset expectations ahead of upcoming earnings reports. Think of it as finding a few gold coins in a dumpster fire—technically a win, but the surrounding context is concerning.

Barclays took the most direct step, downgrading Coinbase and warning that "global crypto trading activity has declined to a level not seen since the end of 2023." The bank added that "absent a resurgence in near-term crypto trading activity, we see profitability under pressure at Coinbase." Translation: things are bad, and unless the magic internet money gods intervene, they're going to stay bad.

The slowdown is visible in the data. Coinbase's March trading volume marked "the lowest volume month since September 2024," with April showing "no signs of improvement." For the first quarter, volumes fell roughly 30% from the prior quarter. For those counting at home, that's a lot of decimal points trending in the wrong direction.

Exchanges charge fees on each transaction, meaning lower volumes lead to less revenue. When markets turn quiet, many traders step back. A retail user who once traded weekly during a rally may stop altogether when prices flatten. Multiply that behavior across millions of accounts, and exchange volumes drop quickly. It's like a bar losing money every time someone puts their phone away and pretends to have a conversation instead.

Barclays said its forecast for Coinbase's adjusted EBITDA is about 24% below the Street, driven largely by weaker spot trading and retail activity. Wall Street has officially lowered its expectations, which is never a fun call to receive right before earnings season.

Crypto prices have pulled back in the first quarter. Bitcoin lost over 22% of its value in the first quarter, while ether was down 29%. Some called it a healthy correction. Others called it Tuesday in crypto.

Oppenheimer cut its Coinbase volume estimate to $211 billion for the quarter, down from $244 billion previously, and now expects total revenue of $1.48 billion, below prior forecasts and consensus. The $33 billion haircut should cover roughly three days of Twitter influencer sponsorship deals.

Circle continues to expand the USDC stablecoin network, with stablecoin market cap and USDC transfer volume rising about 1% and 12% quarter over quarter, respectively. Crypto platform Bullish saw "strong on platform activity" tied to volatility in February, though spot volumes still missed expectations. Strong platform activity sounds great until you realize "strong" means "slightly less terrible