Coinbase stock COIN still a buy after an 80% drop? Let’s see

Key Takeaways:

  • Coinbase stock COIN lost nearly 80% of its value due to the cryptocurrency crash.
  • The company registered nine digit losses in revenue in Q1, expecting to be deeper in the red in Q2.
  • There might be a silver lining for investors, if Coinbase detaches from the Bitcoin price action.
Coinbase stock, Coinbase stock COIN still a buy after an 80% drop? Let’s see
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YEREVAN (CoinChapter.com) – Coinbase stock COIN followed the ubiquitous declines in the crypto market. It traded at nearly $70 in Friday’s Asian-Pacific session, after moving sideways for over a week. Notably, COIN’s November high stood at $368.

So is COIN still an attractive buy? There are several factors to consider.

Coinbase stock COIN follows the cryptocurrency crash

The cryptocurrency crash, partially induced by the Federal reserve’s aggressive quantitative tightening policy, hit Coinbase hard. The correlation between COIN and Bitcoin (BTC) prices resulted in Coinbase stock losing 78% from its November high of $368. Moreover, the company’s revenue saw a 36% year-over-year (YoY) drop in Q1.

Coinbase (COIN) in correlation with Bitcoin (BTC) price. Source: TradingView.com
Coinbase (COIN) in correlation with Bitcoin (BTC) price. Source: TradingView.com

The majority of Coinbase’s revenue comes from trading fees. However, the cryptocurrency crash led to lower trading volumes, fueling the fire. The volatility drove the trade volume down to $309 billion, down 8% YoY.

Also read: Coinbase (COIN) dumps to record low alongside Bitcoin while experts give a BUY verdict. 

The number of retail monthly transacting users in Q1 fell 19.3% q/q to 9.2 million. As a result, Coinbase lost $430 million in revenue YoY after making a $771 million profit in Q1 2021. The company expects further declines in monthly transacting users and trading volume, as well as subscription and service revenue, in the coming quarter.

As Coichapter previously reported, Coinbase CEO Brian Armstrong stated that in the case of a bankruptcy, crypto-assets it holds in custody on behalf of its customers could be subject to bankruptcy procedures. Moreover, those customers could be classed as unsecured creditors in general.

Regulatory independence – blessing or curse?

The absence of governmental regulation made the decentralized finance sector appealing to investors in the first place.

However, the flip side of freedom is responsibility. As crypto-assets are not insured by any government institution, Coinbase and other crypto-related companies rely on internal governance to protect investors’ assets.

Also read: Coinbase unveils NFT marketplace to boost customers interaction.

Moreover, public faith in the company’s competence to appropriately manage customer funds is paramount. Many investors that jumped on the bandwagon in 2021 are now witnessing their first bear market and cryptocurrency crash and the ‘risk’ side of the high risk/high reward investment.

Will Coinbase survive the winter?

Dilantha De Silva, the author of Leads from Gurus, pointed out that traders shouldn’t equate crypto volatility with high risk.

There are a lot of risks associated with investing in cryptocurrencies and Coinbase stock, but volatility should not be considered one. Volatility is part of the long-term price cycles of cryptocurrencies, and it will have an impact on Coinbase as it is one of the largest operators of digital assets in the world.

commented the expert.

He also pointed out that COIN’s dependence on the crypto market moves is temporary. The stock could detach from Bitcoin volatility in the long run as the company builds “recurring revenue streams and the subscription business.”

Also read: Bitcoin to $20K likely as Fed minutes show more aggressive rate hikes.

Coinbase stock will “follow its earnings as the transition progresses,” allowing investors to see high returns. However, the expert asserted that blockchain technology should play an integral role in the global economy for that to happen.

As of now, cryptocurrency trading remains the main focus of the blockchain industry.

Thus, Coinbase stock COIN is attractive for the long haul but not as a short-term investment opportunity. The cryptocurrency crash might have damaged Coinbase’s reputation and stock price, but long-term detachment from BTC price could be the silver lining investors need.

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Coinbase stock, Coinbase stock COIN still a buy after an 80% drop? Let’s see

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