- Coinbase Shares Down 87% From IPO Price, Now Valued At $11 Billion
- Regulators move into U.S. industry, creating an increasingly hostile environment
- Not only are stock prices reflecting these developments, but trading volumes in the crypto space are plummeting, writes research director Dan Ashmore.
coin base We are at war.
The exchange is the only publicly traded crypto platform in the US, an attribute that has been a major strength at the time of its April 2021 IPO. This was a time when Bitcoin was trading at his $63,500, and the dinner table was filled with questions like: How far can we go?” and everyone wanted a piece of cryptocurrency pie.
Things are a little different today. Coinbase’s status as a public company may help when it comes to transparency in an increasingly opaque crypto industry, but it also presents a problem for everyone to see. . The stock is down 87% from its floating price.
Coinbase faces battle on multiple fronts
i wrote deep dive CEO Brian Armstrong spoke out on the company’s outlook last October after it was revealed that he had sold a 2% stake. Coinbase’s future looks more uncertain than ever.
The company faces challenges on multiple fronts. The first is, obviously, the state of the crypto industry. Prices, volumes, and interest rates have evaporated at an alarming rate over the course of 18 months. The Fed’s move to tighter monetary policy in the face of rising inflation has siphoned liquidity from the economy, crushing assets at the far end of the risk spectrum. Undoubtedly, cryptocurrencies are definitely on the risk curve.
Bitcoin fell to $15,500 during the cycle, a 77% drawdown from its peak. Currently trading at $29,000 after a surge in the first quarter of this year, Coinbase’s problem goes beyond just the crypto price.
The industry has come under siege from regulators this year, especially the SEC, which cracked down on an area that sparked multiple scandals last year. Most notably the spectacular collapse of the less stable stablecoin UST and cryptocurrency exchange FTX.
Coinbase is gearing up for action after receiving Wells’ notice earlier this year. A Wells notice is a formal warning from the SEC that evidence of illegal activity has been discovered, and legal action may be recommended.
The SEC alleges that Coinbase’s staking service, Prime and Wallet products, and its general listing process may all violate federal securities laws.
Exchanges are fighting. The SEC accused it of leveling legal charges “on the fly,” arguing that legal action against Coinbase poses “significant programmatic risks” and “fails on the merits.”
Exchanges have repeatedly criticized the lack of clarity in cryptocurrency regulation. “The cryptocurrency market suffers from a lack of regulatory compliance. It is not a lack of regulatory clarity,” said SEC Chairman Gary Gensler.
But like it or not, the SEC is ordering it, and this is all very bad news for Coinbase. Fears that the US environment has become too hostile to cryptocurrencies are very real. Coinbase knows this even if they disagree with why it is happening.
This week, we announced the launch of Coinbase International Exchange (CIE), an institutional platform for international derivatives trading. But that fear is showing up in stock prices. We mentioned the fact that the crypto industry is in turmoil, but Coinbase has significantly underperformed Bitcoin in the last year.
Perhaps the two best benchmarks for Coinbase performance are Bitcoin and Nasdaq. The graph below shows the width of the chasm.
Even this year, exchanges have not caught up as prices rebounded across the crypto industry. The company’s stock may be up 44% year-to-date, but bitcoin is up 68%.
In short, Coinbase has two big problems. First, the industry in which the company operates has collapsed compared to pandemic-time highs, and second, regulators are threatening its very existence as a U.S. company.
Neither of these problems are easy to solve. And the stock price reflects that.