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Bitcoin prices are crashing. The same goes for shares of leading cryptocurrency trading company Coinbase Global.
Coinbase fell 5% on Tuesday and is now trading at around $ 212 not far from its all-time low and far from its all-time high of around $ 429.50.
It’s only been two months since Coinbase went public via a direct listing of its shares. Needless to say, the timing was terrible. Coinbase shares are down more than 35% from its closing price on its first day of trading. Bitcoin suffered a decline of more than 50% during this period.
While many Coinbase bulls have argued that the company would be immune to the price volatility of individual cryptos like bitcoin, ethereum, and dogecoin, this has clearly turned out not to be the case.
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Coinbase is still tied to the bitcoin fortunes, even as users continue to trade regardless of whether crypto prices go up or down. Simply put, Coinbase generates less revenue when prices drop.
“Coinbase derives 90% of its revenue from trading fees assessed as a percentage of the transaction,” Chris Kuiper, analyst at CFRA Research, said in a report this month.
“Even its other sources of income, such as custodial services, are also based on fees as a percentage of stored assets and therefore correlate with the price of crypto-assets,” Kulper added.
Of course, all the volatility could create a good opportunity for those brave enough to buy the dips.
“If the future of finance, stores of value and innovative ways to process goods and services becomes increasingly linked to blockchain, we believe that [Coinbase] should be a major beneficiary, ”Canaccord Genuity analyst Joseph Vafi said in a report last week.
Vafi added that Coinbae is “a kind of ‘super ramp’ to everything crypto,” but conceded that “today this ramp is mostly made up of trading income.” Still, he believes the stock’s big pullback now makes it more attractive to long-term investors.
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But Coinbase isn’t the only crypto-linked stock that is pulling a Tom Petty and falling free lately.
Software company MicroStrategy, which owns a large chunk of bitcoin in its corporate balance sheet, fell 11% on Tuesday after falling 10% on Monday.
Shares of bitcoin miners Riot Blockchain and Marathon Digital Holdings as well as Chinese bitcoin mining equipment company Canaan also all plunged this week.
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