Is Coinbase stock COIN a buy amid insolvency rumors? Expert says yes

Key Takeaways:

  • Coinbase stock COIN is down 85% from the Nov. 2021 top.
  • Expert says it's a good 'buy the dip' opportunity
  • FUD around Coinbase insolvency is unfounded.
Coinbase, Is Coinbase stock COIN a buy amid insolvency rumors? Expert says yes
image from coinbase.com

YEREVAN (CoinChapter.com) – Coinbase stock COIN traded at $54 on July 18, 85% below its November 2021 peak of $369.

The fears of an extended drawdown prompted Goldman Sachs to mark the stock as a ‘sell.’ However, LK Shelley, the Managing Partner at Affiniti Ventures, believes the stock will follow Bitcoin into recovery. Thus, the flatlining price could be an opportunity to ‘buy the dip.’

Coinbase (COIN) price on July 18. Source: TradingView.com
Coinbase (COIN) price on July 18. Source: TradingView.com
Also read: Ex Coinbase exec sounds alarmed over more ‘crypto winter’ crashes in coming days. 

Is COIN a buy, after all?

Shelley based her COIN theory on Bitcoin cycles, given the stock’s dependency on BTC/USD price action. The expert commented that long-term investors could eye a “potential 7.2x upside gain during the recovery within this four-year crypto cycle.”

Coinbase (COIN) stock's dependency on Bitcoin. Source: TradingView.com
Coinbase (COIN) stock’s dependency on Bitcoin. Source: TradingView.com

Thus, if the Bitcoin price picks up after halving, COIN is likely to follow. Meanwhile, the expert pointed out that the estimated Q2 revenue for Coinbase was over $1 billion, down 5% compared to Q1.

Also read: Coinbase stock prices crash near 11% as Goldman Sachs downgrades to ‘sell’

Coinbase expects to trim some of its highest-expense areas, including HR and Marketing. These cuts will put the operating expenses at $1.294B, representing a 25% decrease compared to Q1.

This also results in an operating loss estimated at -$197.18M, or a decrease of 65% and net loss is -$174M (a decrease of 59.5% compared to Q1, giving an estimated EPS of -$0.8). If Coinbase cannot reduce operating expenses as much as 25%, the loss will be higher in Q2.

said Shelley.

Moreover, on July 16, several leaked emails surfaced, claiming the exchange plans to cancel its affiliate program. In detail, the program awarded 50% of a referee’s trading commission to the affiliate in the first three months of joining and granted other privileges on the platform.

Does Coinbase have liquidity issues?

Many crypto analysts saw the suspension as a “major red flag,” feeding insolvency rumors. However, the debate is ongoing, with many opposing the grim predictions. “If Coinbase were to go insolvent, this would break the crypto space,” commented Ben Armstrong, also known as BitBoy.

However, the comment section offered opposing opinions as well.

Also read: Avoid Coinbase stock at all costs — ex hedge fund analyst. 

The FUD is unfounded, experts believe

Dan Held, the founder of another crypto exchange Kraken, supported Coinbase, debunking the liquidity crisis FUD.

A Coinbase Bankruptcy must be avoided AT ALL COSTS, b/c if depositors lost all or part of their money or crypto, we simply cannot overestimate the fallout. Perception becomes reality and what a Coinbase bankruptcy would symbolize regarding adoption cannot be overstated.

commented crypto regulation lawyer John E Deaton.

However, the lawyer added that he expected industry leaders to “NEVER allow” a Coinbase bankruptcy.

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

While Coinbase insolvency rumors created a lot of FUD on Twitter, they do not seem grounded in research. Given macroeconomic headwinds, experts don’t see eye to eye on whether COIN is a buy or a sell in Q3. However, Coinbase will not likely collapse like other platforms on the crypto CeFi scene.

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