Coinbase Stock Hits Its Lowest Despite Crypto Market Rally

Yerevan (CoinChapter.com) — There is an awkwardness in how Coinbase stock responds to its amazing revenue stream that comes from a flurry of cryptocurrency-focused outlets, including a crypto exchange, a trading platform, and a digital asset custodianship.

Dubbed as COIN, the relatively young Nasdaq stock has crashed by as much as 40.78 percent from its debut day top of $428.93. At its intraday low Thursday, COIN was changing hands for $254.02. That is despite the growth of digital asset markets as a whole, which directly contributes to the Coinbase earnings. But the prospect of higher revenue is doing little in offsetting the company stock’s bearish bias.

What Analysts Say About Coinbase Stock

COIN plunged by more than 6 percent in the early New York trading session a day after Dan Dolev of Mizuho Securities raised his second-quarter earnings estimation for Coinbase to $1.6 billion. He noted that the average trading volume across Coinbase trading quarters hit $3.7 billion in April, adding that it would mean $330 billion in volume by the end of the second quarter.

Many analysts had expected a steeper decline in trading volumes. But Mr. Dolev’s projections show them to be very modest. That prompted the market strategist to expect that the COIN share would value around $315 by June 2021 close.

Bernstein Research’s Harshita Rawat expects COIN to trade around $250 at the Q2 close, noting that there is not much upside to the share. Meanwhile, Kyle Voigt, analyst at Keefe, Bruyette & Woods, advises investors to hold the stock with a $325 target in mind.

COIN was trading at $256.34 as of 11:13 EST.

Coinbase stock declines despite lofty earnings expectations. Source: COIN on TradingView.com

So…

….what’s bothering COIN stock, after all? Mr. Dolev writes in his note to investors that its fears of declining commissions as Coinbase grapples with increasing rivalry in the crypto markets, especially from existing financial giants that have lately taken a special interest in Bitcoin.

“With over 80% of total revenue reliant on retail transaction fees, significant user overlap with PayPal and Square’s Cash App, and high user sensitivity to transaction fees, the specter of downward pressure on commissions is a concern.”
The analyst said on Tuesday.

Coinbase currently charges a base commission rate of 4 percent on all transactions, which is costlier than trading on traditional stock market exchanges. Comparatively, PayPal’s trading fee is just 2.3 percent for cryptocurrency purchases worth between $25 and $100. Meanwhile, it reduces the commission to 1.5 percent for sales over $1,000.

Robinhood offers commission-free crypto trading on its platform.

That somewhat explains why Coinbase share is underperforming even though demand for crypto assets soar.