‘Crypto Winter’ Causes Coinbase Shares to Crash Like Pit Bitcoin, Ether and Other Major Cryptocurrencies

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Shares of crypto broker Coinbase plunged to a record low on Wednesday after the company reported a worse-than-expected loss driven by dwindling trading volumes — prompting a wave of analysts to downgrade the stock with the price of bitcoin, ether and other major cryptocurrencies to their lowest levels in a year. One approx.

key facts

Coinbase stock plunged as much as 24% to a record low of $52.80 on Wednesday, posting its worst one-day drop ever and sending the stock down nearly 84% from its peak in November, while Bitcoin also hit a record high in the same month. .

Lagging shares, Coinbase revealed its first loss as a publicly traded company after the market closed Tuesday, reporting a second-quarter loss of $430 million (compared to $771 million profit one year ago) and revenue down 53% to $1.2. one billion.

In a letter to shareholders, the company said the drop in crypto prices and volatility that began late last year “directly impacted” the results and pushed trading volume to $309 billion (8% less than last year), but it remains “as excited as it was.” Always.” About the future of cryptocurrency developments, such as the launch of its market for non-fungible tokens.

At least seven analysts downgraded Coinbase shares or lowered their target price for the stock after the earnings report, with Wedbush analyst Moshe Katri noting that the company attributed the loss to increased investment in new products “despite the emergence of a crypto winter.”

Adding to the uncertainty on Wednesday, the price of Bitcoin briefly fell below $30,000 – and reached its lowest level since June – after the Labor Department’s monthly Consumer Price Index report showed inflation exceeded expectations despite a lull last month.

Although Coinbase has reiterated that volatility is part of long-term price cycles for cryptocurrencies, Raymond James analyst Patrick O’Shaughnessy told clients that he “doubts the recent sell-off could be more risky — especially with crypto failing to act as an inflation hedge so far in the 2022.”

main background

Coinbase was first introduced to the public market last April after a watershed year for cryptocurrencies, driven in large part by increased institutional adoption. The company’s market capitalization reached a record closing level of $76.9 billion on November 9 – just a day before bitcoin hit a record high of nearly $69,000. However, recent months have proven difficult for the emerging market. Bitcoin has since collapsed more than 55% amid growing concerns about the Federal Reserve’s efforts to curb inflation by easing pandemic-era stimulus measures. The cryptocurrency market was once worth over $3 trillion, and now it’s worth about $1.5 trillion.

What to watch

“In the long term, we continue to believe that significant retail pricing pressures are a question of when, not if, and we also believe that the negatives of increased crypto regulation in the future will certainly outweigh the positives,” O’Shaughnessy wrote. In late 2017, a wave of early regulatory action – largely targeting the then booming initial coin offerings – led to a nearly 80% crash in cryptocurrency prices and a years-long bear market.

Contra

On Tuesday, Goldman Sachs analyst Will Nance lowered Coinbase’s stock rating, but said he still believes the stock is “an excellent way to gain exposure to the original cryptocurrency ecosystem.” Other analysts were also less bearish, with Needham’s John Todaro maintaining a buy rating and saying he “remains excited” about the Coinbase blockchain rewards and cloud subscription services.

Amazing fact

Bitcoin is down 35% so far this year, while Cardano’s Ether, XRP and Ada prices are down 39%, 47% and 57%, respectively.

in-depth reading

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