Crypto contagion could weigh on COIN stock

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Blockchain enthusiasts know Coinbase Global (NASDAQ:COIN) as a platform where people can buy and sell Bitcoin (BTC-USD) and other cryptocurrencies. The fate of the COIN stock depends, to a large extent, on how the public perceives the crypto community.

Currently, the perception of this community is not very positive. As regulators crack down on crypto-related businesses, Coinbase investors could end up selling their shares at ever-lower prices.

We can hope this won’t be the unfortunate outcome of the FTX debacle. However, the outlook is not positive for companies that are entrenched in the world of digital assets. Of course, Coinbase is among the most crypto-centric companies listed on the Nasdaq exchange.

In other words, you cannot separate Coinbase from the larger cryptocurrency market problems created by FTX. Like it or not, the FTX fiasco is drawing negative attention to Coinbase and other crypto exchanges. The conclusion here is practically inevitable: you can save yourself a lot of trouble and simply choose not to invest in Coinbase.

COIN Coinbase Global $41.26 What’s going on with COIN stocks?

If you need a classic example of what a meltdown looks like, just take a look at the COIN stock. It’s gone from $250 to under $50 this year, believe it or not.

Time and time again, the perma-bulls have been wrong about Coinbase. Perhaps they should listen carefully to Bloomberg Intelligence credit analyst David Havens, who describes Coinbase’s debt as a “canary in the coal mine.”

As early as May, Coinbase reportedly said its customers could be “treated like general unsecured creditors,” reports Bloomberg, “if the company goes bankrupt.” Coinbase didn’t necessarily use those exact words, but the prospect of potential bankruptcy should have been a wake-up call for all potential investors.

Another red flag is the price of Coinbase corporate bonds. These bonds offer high yields, but their prices have crashed in 2022. One of Coinbase’s debt notes, shockingly enough, has fallen from 92 cents to around 53 cents on the dollar this year.

FTX issues will likely continue to affect Coinbase

Meanwhile, the well-documented FTX disaster is sure to have ripple effects over the coming months. James Bromley, a lawyer representing FTX’s new management, recently admitted that the company, which is in bankruptcy proceedings, was “run as a personal fiefdom” of former CEO Sam Bankman-Fried .

FTX was controlled by “inexperienced and unsophisticated individuals”, Bromley added. The plot continues to thicken – and none of this will help COIN stock, even if it’s not Coinbase’s fault.

Worse still for Coinbase, the company is now on someone on Capitol Hill’s regulatory radar. Specifically, U.S. Senator Ron Wyden of Oregon is seeking “answers from the six largest cryptocurrency exchanges” — including Coinbase, of course — “on the risks consumers face when investing on their platforms. “.

You can actually read Wyden’s letter to Coinbase CEO Brian Armstrong here. In it, the senator cites the downfall of FTX and asks not just one, but 13 tough questions of Armstrong. Hopefully, the CEO will submit his response by the stated deadline of December 12.

What you can do now

Whether Coinbase played a direct role in FTX’s troubles is irrelevant at this point. What matters to investors is that Coinbase is associated with a cryptocurrency exchange industry that has major PR issues.

So don’t be too surprised if more people on Capitol Hill ask about Coinbase. It’s definitely not the kind of attention a company would want. Thus, it is wise to avoid collateral damage in the crypto exchange space and avoid COIN stocks altogether.

As of the date of publication, neither Louis Navellier nor the member of the InvestorPlace research staff principally responsible for this article holds (directly or indirectly) any position in the securities mentioned in this article.

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