Cryptocurrencies/Coinbase: revenues rise but bitcoin’s risky asset status hurts

Cryptocurrencies/Coinbase: revenues rise but bitcoin’s risky asset status hurts

Crypto evangelists sometimes claim that digital assets such as bitcoin are an investment hedge, their performance unchained from other asset prices. Russia’s invasion of Ukraine has blown a new hole in that theory. Fear has lifted the price of gold to the highest point since last summer. Yet bitcoin is trading like any other risk asset.

On Thursday, Coinbase reported boast-worthy fourth-quarter results that already look outdated. The US-listed crypto exchange breezed past expectations to report revenue of $2.5bn — up from less than $500mn in the same period of 2020.

But Coinbase is a lagging indicator of crypto markets. Falling prices in the current quarter mean the company expects transaction volumes to fall, dragging subscription and service fees down. Active trader numbers, over 11mn at the last count, are dropping.

The knee-jerk retreat from risk across all markets shows that crypto was no different in becoming a centre for pure speculation. There are fears that the combination of inflation and war could spur another crypto winter. Bitcoin reached $69,000 in November. It now trades below $39,000.

Coinbase boss Brian Armstrong dismisses these long-term fears. He may be right. There is reason to think that the downturn will not be as severe or long-lasting as