(Bloomberg) -- Crypto’s boom-and-bust nature already has some investors and analysts looking past what should be blowout first-quarter results for Coinbase Global Inc. 

The largest US digital-asset trading platform is forecast to have swung back to a profit from a loss in the year-earlier period, with trading volume and mobile-app downloads surging during a resurgence in demand that was driven by the introduction of US spot Bitcoin exchange-traded funds. With the euphoria around the dominant cryptocurrency showing signs of waning in April, analysts are becoming concerned that a further retreat by the notoriously volatile token will curb demand from one of Coinbase’s biggest customers - individual investors. 

The second quarter “is shaping up weaker than Q1, and the recent crypto price pullback has the potential to completely unwind the retail user gains we saw,” said John Todaro, an analyst at Needham & Co. who has a “buy” rating on Coinbase shares. 

That concern is already being seen in the stock of San Francisco-based Coinbase. After surging more than 50% in the first quarter, the stock slumped 23% in April. Bitcoin retreated 15% last month, after jumping 67% in the quarter.  

Coinbase is forecast to report profit of $281 million, or $1.15 a share, according to analysts surveyed by Bloomberg. It had a loss of $79 million in the year-ago period. Revenue is expected to be $1.32 billion, up around 40% from $772.5 million in the 2003 period. 

Oppenheimer & Co.’s Owen Lau, who has an “outperform” rating on Coinbase, expects even better results than his peers. He forecasts $1.41 billion in revenue and profit of $1.24 a share.

“First-quarter trading volume is up 100% year-over-year and quarter-over-quarter,” said Lau. “The results should come in above expectations.”

Lau said there’s an “increasing likelihood” that the company will end up earning a profit for the full year. Coinbase returned to profitability in the fourth quarter of last year, after a string of seven consecutive quarterly losses over the last crypto winter. The fourth-quarter profit helped the company eke out an annual profit in 2023.

Coinbase registered $307 billion in spot trading volume in the first quarter, its highest since the last three months of 2021, according to researcher CCData, which notes the figures don’t include Coinbase’s over-the-counter trading related to institutional and ETF customers. Its market share of spot trading has increased to 5.35%, up from 5.05% in the year-ago quarter, CCData said. 

Downloads of Coinbase apps skyrocketed to nearly 1.7 million in March from about 640,000 in February, according to market-intelligence firm Sensor Tower. Those downloads have fallen sequentially in April, though, by about 44%, Sensor Tower said.

Nevertheless, Coinbase entered this crypto cycle as a very different company than the one that exited the last, thanks to its efforts to diversify. The company now provides services to the US Bitcoin ETFs. It also has about half of its revenue coming from subscriptions and services — a category that includes revenue from the USDC stablecoin. In 2022, subscriptions and services accounted for only 25% of the total.

“Coinbase’s subscription and services revenue has grown steadily, which can provide some downside protection to Coinbase’s total revenue,” Lau said. 

The USDC stablecoin, from which Coinbase receives revenue, saw its market cap rise 34% in the first quarter to $33.2 billion. The increase, coupled with high interest rates on USDC’s reserves, should result in an additional boost for Coinbase. Coinbase’s derivatives trading and Base blockchain business are ramping up as well.

An accounting change started this year should boost Coinbase’s performance in the quarter as well, by letting the company value most of the cryptocurrencies on its balance sheet at market value. Still, that could make the company’s balance sheet more volatile going forward. 

At the same time, Coinbase likely faces continued uncertainty after being sued by the US Securities and Exchange Commission last year for various violations. 

“The market expects it’s going to be a long legal battle, and it will go to the Supreme Court to get resolution,” Lau said. “It takes time to figure out what will come next.”

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