Key Takeaways:
- Coinbase stock COIN shaved 84% off its valuation.
- More pain is yet to come, says analyst.
- Crypto market winter makes COIN a risky investment.
YEREVAN (CoinChapter.com) – Coinbase, the largest crypto exchange in the U.S, saw its stock COIN drop 84% from its all-time high of $367 in Nov. 2021 and hit nearly $59 on June 24.
Moreover, the crypto market bled out $1.2 trillion year-to-date, and experts estimate that COIN will likely follow. For example, Albert Lin, an ex-hedge-fund analyst, urged traders to “avoid Coinbse stock” altogether.
Coinbase transaction revenue declining
Coinbase charges revenue for each transaction, so it might be considered a beneficiary of increased trading activities. In other words, the exchange will charge its fees whether traders buy or sell crypto. Following this logic, COIN should be unrelated to the crypto market volatility.
However, that is not the case. As Lin pointed out, though higher volatility leads to higher trading activities, this is not a “sustainable driver” for Coinbase’s business in the long term. In addition, the expert noted that Coibase determines its trading revenue by the total value of every trade rather than the number of tokens traded.
Also read: Coinbase stock COIN still a buy after an 80% drop? Let’s see.
Hence, the value per trade becomes substantially lower when digital assets decline in price. For example, as the Bitcoin BTC price dropped 57% year-to-date, the number of traded tokens would need to grow at least 2x to match the original trading value.
COIN prospects bleak
As a result, COIN, a crypto-dependent stock, has been moving in tandem with Bitcoin.
Also read: Coinbase (COIN) dumps to record low alongside Bitcoin while experts give a BUY verdict
Lin concluded that “Coinbase remains a risky bet” as the Fed interest rate hikes and possible recession push the crypto market into a deeper pit.
COIN is not a safe bet with DeFi in trouble
The digital asset market is a volatile and “largely unpredictable” space. According to the ex-hedge-fund expert, the “crypto winter is here,” and Coinbase stock could lose even more value in the coming quarter.
Meanwhile, Coinbase announced an 18% layoff of its workforce, which constitutes 1,100 people.
The market challenges pushed other companies in the same direction. For example, another crypto exchange Crypto.com announced staff reduction plans. Trading platforms Gemini and BlockFi followed.
Also read: Coinbase stock drops to historic low, but Wall Street sees a 100% upside move in the books
Moreover, the DeFi industry suffered a massive blow that started when stablecoin issuance platform Terra imploded in mid-May.
The incident sent blast waves across lending platforms, with Celsius pausing customer withdrawals and media activity. In addition, three Arrows Capital (3AC) faced margin calls, and the massive liquidations are not likely to stop there.
Coinbase Pro rumors
Another worrisome rumor circulated on Twitter about Coinbase allegedly shutting down the Coinbase Pro service.
The company addressed the speculation in a lengthy thread, explaining the plan in detail.
Over the coming months, we plan to merge the features and fee schedule of Coinbase Pro into a new unified Coinbase account that offers our users the choice of an advanced trading experience or the simplicity of the Coinbase consumer app.
clarified the platform.
Also read: Another villain in Bitcoin market misery: Treasury Inflation-Protected Securities (TIPS).
In short, “crypto winter is here,” Coinbase will struggle as long as Bitcoin, and larger altcoin prices do not see a meaningful rebound.
Lin agreed with the short-term bearish outlook for COIN pointing out that the “risk/reward for Coinbase is just not there, and investors ought to assess whether the stock is worth the wait carefully.”
