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Crypto giveth, and crypto confuseth the heck out of Wall Avenue.
Within the wake of Coinbase’s earnings report yesterday afternoon, shares of the U.S. crypto change are off sharply this morning. What occurred? Public-market buyers continued to underestimate how unstable the crypto market is, leaving them to over-index on positive factors and over-despair on much less spectacular outcomes.
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Coinbase shouldn’t be alone in giving Wall Avenue raptures adopted by panics. Due to falling crypto buying and selling exercise, we just lately noticed an analogous miss in Robinhood’s earnings when it comes to uncooked outcomes and sharp ensuing declines in its share worth.
Notably, each corporations made noise earlier than their earnings stories that their crypto incomes would fall in Q3 2021 in comparison with the second quarter. And but it appeared that public buyers have been nonetheless shocked when that, in truth, occurred.
The velocity of the crypto financial system as a complete could also be just too fast for public-market buyers to totally grok. And the exchanges aren’t even the swingiest of crypto-themed investments. Let’s speak about it.
Up, down, up, down (repeat)
Robinhood noticed its buying and selling revenues from crypto fall from $233 million in Q2 2021 to simply $51 million within the third quarter. That the corporate had explicitly informed buyers {that a} slowdown was coming does make the declines much less painful, though it could be that Wall Avenue had merely anticipated a smaller decline.
To reiterate, Robinhood had previously told investors throughout its IPO course of that it anticipated to submit sequential income declines in Q3 “on account of decreased ranges of buying and selling exercise relative to the report highs in buying and selling exercise, notably in cryptocurrencies, in the course of the three months ended June 30, 2021.”
And but! Traders have been perplexed.
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