Mizuho senior analyst Dan Dolev believes that Trump’s introduction of political risks into the crypto market will have a negative impact

Dan Dolev, a senior analyst at Mizuho, discussed the evolving crypto market on CNBC's "The Exchange" on July 29. He noted that cryptocurrencies are increasingly integrated into the mainstream financial system, with growing political interest. However, Dolev expressed a bearish outlook on Coinbase, despite this trend.

Key Issues Facing Coinbase

Dolev identified several concerns about Coinbase's financial health and market position:

1. Revenue Dependence on Bitcoin: Dolev highlighted that only 20% of Coinbase's revenue comes from Bitcoin transactions. The rest relies on other, less successful sources, posing a risk to the company's overall financial stability.
2. Declining Take Rates: He predicted a decline in Coinbase's transaction fees, or take rates, due to intensifying competition. This reduction could strain the company's revenue further.
3. Impact of Bitcoin ETFs: While Bitcoin ETFs attract significant assets, Dolev noted that Coinbase earns less from ETFs compared to spot trading. As ETFs gain popularity, Coinbase's more lucrative spot trading revenue might decrease.

Market Share and Competition

Dolev pointed out that Coinbase is losing market share to other platforms, such as Robinhood, which are capturing a larger portion of global crypto trading volumes. He emphasized that the exchange's dominance could be challenged as new entrants offer more alternatives. "There's no scarcity in an exchange trading Bitcoin," Dolev remarked, suggesting that competition will only grow.

Political Risks in Crypto

Dolev also addressed the political risks associated with cryptocurrencies, particularly the idea of a Bitcoin strategic reserve proposed by political figures like Donald Trump. He argued that such political interventions add uncertainty and risk to the market, potentially harming Bitcoin and Coinbase. "I actually think that the Trump thing actually hurts crypto and hurts Bitcoin because now you're adding political risk," Dolev stated. He stressed that separating Bitcoin and Coinbase from political debates would be beneficial for their stability.

Optimism for Fintech, Especially BNPL

Shifting to fintech, Dolev expressed optimism about the Buy Now, Pay Later (BNPL) sector. He specifically mentioned companies like Affirm and Sofi as well-positioned to benefit from current economic conditions:

1. Affirm: Dolev argued that the economic environment is highly favorable for BNPL platforms like Affirm, especially if interest rates decrease, boosting profitability due to lower borrowing costs.
2. Sofi: He noted that Sofi could see significant growth in personal loans if delinquencies decrease and interest rates drop, making it an attractive investment.

Current Market Status

At the time of reporting, Bitcoin was trading at $66,432, down 3.24% over the past 24 hours.

Coinbase's stock was trading at around $232.25, a decrease of 3.59% on the day.