The credit ratings agency Moody’s just issued a fresh warning on the US banking system. In new research note, Moody’s says it’s cutting the ratings of 10 regional banks, and is considering whether to downgrade a number of big lenders including Bank of New York Mellon, US Bancorp, State Street, Truist Financial, Cullen/Frost Bankers and […]
The post US Banks Facing ‘Significant Risk’ of Deposit Flight As Profit Margins Narrow, Warns Top Ratings Agency appeared first on The Daily Hodl.
After the tumultuous downfall of three major banks, namely Silvergate Bank, Silicon Valley Bank, and Signature Bank, several central banks made a collaborative announcement of a swift, coordinated emergency response. The intervention aimed to furnish U.S. dollar liquidity, with the intention of alleviating the impact of such severe shocks on the flow of credit to […]
Roughly ten days ago, the credit agency Moody’s Investors Service downgraded the U.S. banking sector from “stable” to “negative.” In a recent update on Thursday, the company stated that there is still a risk to the U.S. economy. The managing director of credit strategy at Moody’s explained that the country “will be unable to curtail […]
After the failure of three major U.S. banks last week, with two of them being the second and third largest banking failures in the country, Moody’s Investors Service has downgraded the rating of the U.S. banking system from “stable” to “negative.” As one of the “Big Three” credit rating firms, Moody’s cited a “rapid deterioration […]
One of three biggest credit rating agencies is reportedly working on a scoring system for cryptocurrencies pegged to other assets, such as the US dollar, gold or other digital assets. According to a new report from Bloomberg, credit rating titan Moody’s is developing a system that can analyze up to 20 stablecoins based on the […]
The post US Credit Ratings Giant Developing Stablecoin Scoring System: Report appeared first on The Daily Hodl.
Analysts from Moody’s and JPMorgan hailed the exchange for its strong reputation but said it wouldn't be enough to solve its profitability woes.
Cryptocurrency exchange Coinbase won’t escape from the profitability challenges it will face from the crypto market downturn, despite having a strong brand and credibility in the crypto market, according to investment analysts.
Credit rating firm Moody’s released a note on Coinbase on Jan. 19 discussing its downgrade of Coinbase’s senior debt and corporate family rating (CFR) — a rating assigned to reflect the opinion of a company’s ability to honor its financial obligations.
Coinbase’s CFR and senior debt were re-graded to B2 and B1 from Ba3 and Ba2 respectively, indicating the firm is “non-investment grade” and “speculative and subject to high credit risk” according to Moody’s.
The firm noted that Coinbase is suffering from “substantially weakened revenue and cash flow generation” due to “challenging conditions,” specifically depressed crypto prices and lower trading activity.
The market conditions saw Coinbase lay off 20% of its employees, around 950 people, on Jan. 10, its second wave of recent major layoffs following its June 2022 18% headcount slash in a bid to cut cos
However, despite Coinbase’s bid to preserve liquidity, Moody’s still expected “the company’s profitability to remain challenged.”
The bankruptcy of its crypto exchange peer, FTX, is a cause for heightened concern and uncertainty regarding crypto regulation according to Moody’s.
It said a sudden move by regulators in the crypto industry could negatively impact Coinbase’s revenue through increased costs of regulatory compliance.
Moody’s added, however, that increased oversight “could ultimately favor the relatively more mature and compliant crypto-asset platforms such as Coinbase.”
Meanwhile, a separate note from analysts at JPMorgan argued that Coinbase’s credibility and reputation in the industry have strengthened after recent collapses.
“While the crypto-ecosystem has suffered further meaningful credibility issues, Coinbase has emerged with its credibility and brand strengthened — at least relatively."
The financial firm's analysts which maintained a rating of “neutral” for Coinbase in its latest note said Coinbase could even be a “beneficiary of the challenges” other exchanges have faced in the wake of FTX.
The upcoming Shanghai hard fork for the Ethereum blockchain could also be a positive for the exchange according to JPMorgan’s analysts.
Related: Coinbase stops Japan operations amid trading slump
The upgrade “could usher in a new era of staking for Coinbase” with analysts estimating 95% of retail investors on the platform may stake Ethereum post-upgrade, netting Coinbase up to nearly $600 million a year.
On Jan. 6 the Coinbase share price hit an all-time low of $31.95 after over a year of constant price declines according to Yahoo Finance data. The day prior, veteran investor and ARK Invest CEO, Cathie Wood, loaded up on $5.7 million worth of Coinbase shares.
Since then the share price of Coinbase and other crypto-related companies have surged.
Coinbase gained 72.6% since the Jan. 6 low and traded at over $55 at the close of market on Jan. 20, where it saw an 11.6% gain on the day.
Moody’s, the asset quality rating agency, has warned the high rate of inflation that some countries are facing in Latam will affect the economic recovery in the region. Brazil, Chile, and Mexico are said to be the countries more affected by this phenomenon, and their recovery will depend on other factors to attenuate the effects […]
Moody’s said further downgrades could follow if Coinbase doesn’t diversify from its current revenue model or it's unable to turn a profit even in a prolonged bear market.
Credit ratings agency Moody’s has downgraded the Corporate Family Rating (CFR) and guaranteed senior unsecured notes of crypto exchange Coinbase, and stated that both ratings have been placed under review for further downgrade.
The CFR, a rating assigned to reflect Moody’s opinion of a company’s ability to honor its financial obligations, was downgraded from Ba2 to Ba3 which is considered as below non-investment grade.
Senior unsecured notes are a type of debt a company holds that is not backed by any assets and in the event of bankruptcy must be repaid before any others. Moody’s downgraded Coinbase’s from Ba1 to Ba2.
Earlier in May, Cointelegraph reported Coinbase’s junk bonds tanked in response to an underwhelming first quarter and since the report, the bonds have continued to fall a further 9.5%.
In its rationale for the downgrades, Moody’s highlighted Coinbase’s revenue model “is tied to trading volumes, transaction activity per user and overall crypto asset prices.” It said the steep price decline in crypto over the past months has caused customer trading activity to wane, which in turn caused weaker revenue and cash flow to the company.
The uncertain environment forced Coinbase to layoff about 18% of its staff on June 14. But even with this measure, Moody’s said it expects Coinbase’s profitability to “remain challenged in the current environment”.
Competition for customers has also been heating up in the United States after Binance.US began offering zero-fees spot trading for Bitcoin (BTC). The offer follows in the footsteps of trading platform Robinhood which pioneered no-commission crypto-trading in 2018.
In a bid to attract users to the platform, on June 23 Coinbase added five new Ethereum (ETH) ERC-20 tokens plus the ability for users to send and receive some assets on the Polygon (MATIC) network along with USD Coin (USDC) on Solana (SOL).
Related: Coinbase to shut down Coinbase Pro to merge trading services
Moody’s said it could call out for further downgrades should crypto prices continue to fall and if trading volumes on the exchange remain the same or fall further. It will also look at whether the firm can reduce expenses, its ability to maintain talent as well as potential “crypto asset regulatory developments.”
The ratings agency added that Coinbase’s ratings could be upgraded again in the future if it can generate a profit even during a bear market and diversifies its revenue through other streams not associated with trading and cryptocurrency prices, noting that crypto transaction-based revenue represented 87% of Coinbase’s net revenue in Q1 2022.
Coinbase's shares were up 13.4% to close at $58.88 on Thursday, but fell just over 1% in after hours trading. Year to date, its shares are down nearly 77%.
Russia’s ability to employ cryptocurrencies to circumvent international sanctions is restricted by the limited size of the crypto market, according to Moody’s. Despite increased use in small transactions, low liquidity is another factor preventing Russians from exploiting the utility of bitcoin and the like. Crypto Assets Not Viable Option for Sanctioned Russia, Moody’s Report Suggests […]
All of the ‘Big Three’ credit agencies have said that El Salvador’s adoption of bitcoin could affect the country’s credit rating in a negative manner. After both Moody’s and Fitch Ratings published reports on the matter in El Salvador, S&P Global said that the bitcoin adoption has had “immediate negative implications for its credit rating.” […]