Coinbase is the worst-hit company among those still reeling from the loss of billions in cryptocurrency trading. Coinbase, the nation’s first and largest crypto exchange publicly traded, has seen its stock prices plunge 81% in 2018 and recently announced that it will re-list.
Coinbase reported a loss of $430 million in its first quarter. Some hedge funds have begun to short the stock. Wall Street is betting that Coinbase’s value will drop further.
Analysts believe that the crypto bubble is still alive and well, so the exchange’s future looks bright. They predict that Coinbase will survive the crypto market slump despite its current difficulties and eventually thrive. Analysts believe that the company has learned how it can survive downturns like this.
Coinbase was founded in 2012 and established itself long before the current cryptocurrency craze hit the U.S. With approximately 5,000 employees, Coinbase now has a market capitalization of $13.8 billion and $256 billion in assets.
John Todaro, a Needham & Co. crypto asset researcher, said that Coinbase has survived a few crypto winters. He added, “Coinbase would need to get progressively worse if they were to be in real danger.”
His confidence is bolstered by Coinbase’s $6Billion in reserves. Todaro stated that the money is “a solid cushion” that will help Coinbase through difficult times.
Coinbase did not respond to a request for comment about how the cryptocurrency market had impacted their business. Brian Armstrong, CEO of Coinbase, stated during an earnings call that Coinbase employees “tend to be our best work when it is down.”
Coinbase’s current problems are due to fewer users completing transactions. Coinbase charges a 1% fee for every transaction. However, company officials stated in May that transactions have slowed down. According to the company, Coinbase’s monthly users have dropped by 19% over the past year.
Devin Ryan, an equity analyst at JMP Securities, stated that the drop in transactions makes Coinbase’s $6 billion war chest more important.
Ryan said that they are “one of the most capitalized firms.” “They have a business model that is based on transactions today, but they are building one of most diverse businesses in the (crypto-)industry.”
Coinbase is seeing fewer transactions than usual, and crypto prices are at their lowest level this year.
As rising inflation tightened the grip on the U.S., bitcoin and other major tokens saw their prices fall this spring. Investors began to withdraw their money from investments that they considered risky, such as cryptocurrencies, due to rising prices for everyday goods like groceries and gas. The price of crypto dropped further as investors sold off digital assets.
Stablecoins losing the U.S. dollars pegs played a part in crypto investors leaving in recent months. Individuals who depended on stablecoins such as luna and terraUSD for protection from the volatility of many cryptocurrencies were shocked to see those coins drop below $1 in May. This was something that was not expected to happen. Investors’ faith in crypto markets was further damaged by the price drops of two benchmark stablecoins.
Bitcoin’s price, which reached $68,000 in November last year, has fallen 56% since then, and is currently trading at $20,250. Ripple is now at around 30 cents, while ethereum has dropped nearly 70% to $11,140.
Ryan believes that the current price slumps will not last forever and that crypto investors will soon return to investing. Ryan believes that once they do, they’ll likely return to crypto and use Coinbase.
He said, “We expect them gain even greater market share after this,” but that it was difficult for us to be in a good moment in the market right now.
Analysts say Coinbase is a case study in real time of what happens when tokens and bitcoin prices fall. Analysts said that Coinbase’s future depends on the price of bitcoin and tokens rising, just like other major crypto platforms such as FTX or Kraken.
The crypto landscape is richer and more diverse than it was when Coinbase went public in April 2021, when its shares traded at nearly $400 per share. Investors are now attracted to competitors like Binance, Crypto.com, and crypto scams and hacks are becoming more lucrative. Federal lawmakers have pushed for greater regulation of digital assets.
Analysts believe that all this activity has led to a greater divide between crypto investors and skeptics. Ryan stated that how quickly Coinbase recovers will depend on how many investors believe there is a great future for digital assets.
He stated that if you have a positive outlook on the future crypto economy and are bullish about where it can go, then Coinbase should reflect your views.
