The crypto exchange Coinbase (COIN) which is one of the biggest in the market offers us a glimpse into the crypto world by default because of the earnings reports they deliver via the public markets.
Its stock price is down 75% since it came public mirroring the plight of its bellwether coin Bitcoin (BTC).
Many people I talk to get peeved at how stocks usually perform once they go public.
Going public for COIN has meant going ex-growth and a nasty drop in valuation for investors.
To say COIN has underperformed the market is an understatement.
They went public around the euphoria of the Bitcoin rise to $65,000 and the aftermath has been brutal.
COIN continues to be hit with rafts of analyst downgrades even after being down 75% and that’s how bad the analyst community views the stock.
No dead cat bounce or no reversion to the mean for COIN!
Not only are crypto prices down across every coin that is relevant, but crypto traders have thrown in the towel.
COIN doesn’t charge trading fees, but they do sell the customer order flow to high-frequency trading firms that profits from retail orders.
The spiral downwards is like a self-fulfilling prophecy with orders drying up resulting in staff layoffs and rescinding already agreed upon new hires resulting in low morale grappling with negative revenue growth.
Cost will need to come down fast because the market won’t be favorable to the guidance of next quarters’ earnings report.
COIN quickly became the equities market poster child for the boom in digital currency prices last year with the largest US cryptocurrency exchange seeing its value surge above $75 billion as Bitcoin hit a record high, but I do believe upcoming regulation will force their business model down the drain.
Also, when a company’s customers become impoverished by losing boatloads of money in the very market the company makes a market for, the future doesn’t sound too appealing to investors.
The once $75 billion company is most likely worth $5 billion today and if customer order flow is made illegal, which the SEC is trying to achieve, then the company is worth $100 million at best maybe not even that.
Heightened competition from other firms has also undermined the stock.
Earlier this month, Binance revealed that it would be offering zero-fee trading for Bitcoin and said it had plans to also eliminate fees on other tokens in the future.
COIN still has an expense outlay of $1.7 billion to shave down.
As Bitcoin hangs on for dear life at $20,000, it could be a death blow once Bitcoin sells off to $12,000.
Much of the synergies that triggered its meteoric rise are gone and the dip buyers have vanished.
I do believe that selling rallies is most likely the best strategy right now in Bitcoin.
The public reports from the exchanges couldn’t be worse and then one must question will COIN also institute a withdrawal freeze like others have if capital bleeds uncontrollably?
A withdrawal freeze is the antithesis of decentralized money and I do believe there are a lot of alienated folks out there who believe in crypto but were highly disappointed by the first 6 months in 2022.
$12,000 appears as the natural reversion point as $20,000 has gone from support to resistance on a technical level.
