Coinbase investors must brace themselves for a period of turmoil. Over the last 12 months, Coinbase Global, a cryptocurrency exchange platform, has had a rocky ride. The fintech company, which once had a market capitalisation of more than $80 billion, has lost over 80% of its value.
To make matters worse, on May 10th, the company reported first-quarter results that fell short of Wall Street expectations. Despite its recent woes, the exchange operator should expect more difficulties ahead.
However, Calyx Token (CLX), an emerging liquidity protocol currently enjoying a fruitful presale, may be Coinbase’s decentralised, more efficient successor.
Keep on reading to find out why.
Coinbase investors are looking to jump ship
Coinbase has benefited from the pandemic. People who had few other options for spending their discretionary money ended up buying digital assets through Coinbase’s platform as global economies collapsed.
Coinbase’s revenue soared from less than $200 million in the first quarter of 2020 to $2.5 billion in the fourth quarter of 2021, owing to the fact that customers had to pay a fee for each cryptocurrency transaction. Similarly, net profit grew from $32 million to $840 million, a 26-fold increase.
However, because Coinbase benefited from increased trading activity, it was penalised when trading volume decreased. That is exactly what occurred in the first quarter of 2022. Lower crypto prices and lower volatility have swung its performance in the opposite direction.
As a result, net revenue decreased by 27% year over year to $1.2 billion, and net income fell from $771 million to -$430 million. While revenue fell by 27%, operating expenses more than doubled, resulting in a net loss for the quarter.
Near-term prospects for Coinbase are still bleak
The first quarter of 2022 may be bad, but the second quarter may be even worse. According to Coinbase’s April metrics, crypto market capitalisation has decreased by 18% since the end of March, while asset volatility has decreased by 14% compared to the first quarter of 2022 average.
In other words, the tech giant anticipates lower trading volume (and revenue) in the second quarter (compared to the first). It plans to manage adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of -$500 million for the full year of 2022. For comparison, EBITDA in 2020 and 2021 was $527 million and $4.1 billion, respectively.
In other words, the poor first-quarter performance will almost certainly continue throughout the year. Investors are wary of the company’s prospects because of the current turbulent external environment, which includes stock market declines, inflation, the ongoing war in Ukraine, and other factors.
On a slightly more positive note, the tech firm is not waiting for the external environment to improve. It is heavily investing internally to ensure that it can profit from the eventual crypto price cycle turnaround. It hired 1,200 people, added Cardano (ADA) to its staking platform, and launched the Coinbase NFT marketplace, for example.
In short, despite these short-term difficulties, Coinbase is positioning itself to emerge stronger in the long run.
Why Calyx Token (CLX) could be Coinbase’s more attractive alternative
Calyx Token (CLX) has been growing in popularity despite not having even launched yet, which is an early indicator of success. The appeal from investors is largely attributed to the platform’s swap feature.
According to the White Paper, Calyx Swap will enable users to get the best token swap prices. Holders can use the swap to switch between tokens in a single transaction.
Calyx Token (CLX) will be able to keep gas fees low and transaction times fast by utilising trade routing to source and merge multiple liquidity pools from decentralised exchanges such as Ethereum (ETH), Polygon (MATIC), Binance Smart Chain (BSC), and Avalanche (AVAX).
This will provide traders with the best exchange rate on any network.
The protocol will be governed and managed by CLX token holders. Their votes and decisions will have the potential to influence ecosystem changes through the CalyxDAO, which is a rich advantage to Coinbase’s centralised governance system.
CalyxSwap will rely on two key components to enable the aggregation of liquidity pools: liquidity providers and traders. Creators who contribute to the pool by contributing ERC-20 tokens to common liquidity pools are known as liquidity providers.
Liquidity pool providers can use the CalyxSwap to create pools on any blockchain they want, or they can add more liquidity to pools that have already been created. Users will benefit from increased capital efficiency for liquidity providers, as well as lower payable slippage.
Anyone can become a liquidity provider on the platform, or create pools by contributing equal amounts of underlying tokens in exchange for liquidity provider tokens.
Traders will be able to swap tokens via CalyxSwap for a small fee, which will go to liquidity providers. The liquidity providers receive 85%, while CalyxDAO receives 15%.
The widespread adoption of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), as well as other technologies such as tokenisation and DeFi, has propelled blockchain into the mainstream. The sky appears to be the limit as more talent and resources enter this industry.
Coinbase will certainly struggle to compete as more savvy platforms such as Calyx Token (CLX) continue to emerge.
While the long term outlook is positive, the near term is uncertain, as evidenced by Coinbase’s latest results. Fortunately, the young company has a strong balance sheet that will help it weather the short-term storm.
It has $6.1 billion in cash and cash equivalents, allowing it to invest in product development and cutting-edge infrastructure to maintain its industry leadership.
Coinbase‘s cash hoard would take more than ten years to deplete if the projected cash burn rate of $500 million is followed. That’s a pretty good safety margin. Nonetheless, investors should keep a close eye on the burn rate. Any significant increase would be a red flag.
Join the crowd by investing in Calyx Token (CLX) now!
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