A buy amid the crypto dip?

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Publicly-quoted crypto exchange Coinbase Global has lost some of its recent gains as it struggles to lift itself from an all time low in January. Today’s (15 February) price of  $195.25 represents a 20% uplift from that low on 28 January

Recent volatility in the crypto market had upset its revenues. Coinbase makes its money by a fee based on the size of the order – and so as prices drop for the same number of transactions Coinbase’s fees – and so also its revenues – will drop.

However in that time the crypto space has grown 20% by market capitalisation according to CoinMarketCap.

Coinbase’s low point of $162 represents a fall of 55% from its November high. Its all time high of $429 came in April 2021.

Can the COIN stock return to the bullish market sentiment of the first days of its trading, or will 2022 see more of the same lack lustre performance?

Current Coinbase price and major drivers

Coinbase stock and other news

Coinbase stock floated on the Nasdaq stock exchange on 14 April 2021, the same day as bitcoin (BTC) reached its all-time high of $64,863. The COIN shares closed their first trading day at $328.29, which gave the stock an initial market capitalisation of $85.8bn.

Shares started trading at $381 and skyrocketed to the high of $429.54, before falling below their starting price. However, the COIN price was still much higher than the reference price of $250.

The COIN stock reached its low of $208.00 on 19 May 2021 and gradually rebounded to its current price level of around $240.72 as of 5 July 2021.  It started October at $221 and rose 52% to $322. Its price on 11 November was $339 following a 15% drop after the third quarter results disappointed analysts. Revenues of $1,275m were more than three times those of the same period in 2020 and the income of $406m was four ties that of 3Q 2020. However both were substanially down on the second quarter.

Today (15 February) its price is $195 – nearly half what it was on 9 November.

On 12 January the company said it is looking to bring regulated crypto derivatives to market, through the partner ecosystem of its new acquisition, FairX, a derivatives exchange regulated by the Commodity Futures Trading Commission.

“Over time, we plan to leverage FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US,” said the company.

The deal gave the shares a much needed 5% boost. Coinbase (COIN) went public in April 2021, making its debut at a time when cryptocurrencies, including bitcoin and ethereum (ETH), were trading around record highs. It has has a rough ride falling as low as $211 from its opening $380.

On 23 January, Coinbase, forewarned of a Financial Times article, released a statement saying it does not “co-ordinate asset listing decisions with anyone not directly involved with our review and listing process.”  The FT article had suggested the company was blurring the “division between market-maker and investor.” Coinbase has a ventures wing that invests in a range of cryptos.

On 15 February the company announced it plans to add up to 2,000 employees across its Product, Engineering, and Design teams during 2022 to address in particular what it said are “enormous product opportunities ahead for the future of Web3”.

Coinbase price drivers

What are the major factors driving the price of the COIN stock? Common triggers to consider:

  • Financial performance: Coinbase Q1 revenue exceeds full year 2020

One of the world’s largest cryptocurrency exchanges, Coinbase had more than 73 million verified users as of 31 January 2022, up from 43 million at the end of December 2020.

On 13 May 2021, the company reported preliminary first-quarter results with 6.1 million monthly transacting users (MTUs), up from 2.8 million at the end of the fourth quarter.

The company had $223bn of cryptocurrency assets on its platform, giving it a market share of 11.3%. More than half the assets, $122bn, are held by financial institutions rather than individual retail investors, reflecting the increased interest in cryptocurrencies from traditional financial firms.

Coinbase reported revenue of $1.8bn for the quarter, exceeding the $1.3bn revenue earned in the whole of 2020. According to its prospectus filed with the Securities and Exchange Commission (SEC), revenue doubled in 2020 from $533.7m in 2019.

The company reported net profits of approximately $771m for the first quarter, compared with $322.3m for the full year 2020.

Coinbase predicts its MTUs to average four to seven million in 2021, depending on the cryptocurrency market capitalisation and price volatility. It anticipates institutional interest will continue to increase.

Q1 2021 key metrics and financial summary

  • The cryptocurrency market performance: price cycles

Activity on the Coinbase platform fluctuates in line with prices for bitcoin (BTC) and alternative coins, known as ‘altcoins’. The company generates more than 90% of its revenues from transaction fees, making its performance dependent on trading volumes.

The strong rally in cryptocurrency prices during the first quarter captured investors’ attention and has seen a growing number of people trading cryptocurrencies for the first time.

Cryptocurrency markets have seen four major price cycles since 2010, which have typically lasted two to four years, the company said in its financial update. The cycles have substantially increased the cryptocurrency market capitalisation and attracted new users. Coinbase explained:

“These cycles can be highly volatile and, as a result, we measure our performance over price cycles in lieu of quarterly results. We believe that we can create long-term value throughout these price cycles.”

The company added: “In terms of expenses, we intend to prioritise investment, including in periods where we may see a decrease in the Bitcoin price. This is because we believe that scale is central to achieving our mission and it is still early in the development of this industry.”

A dip in the Coinbase stock price was driven by the sharp decline in the cryptocurrency market, which triggers FUD (fear, uncertainty, and doubt) among investors and traders.

Tesla’s announcement that it will no longer accept bitcoin (BTC) as payment and the Chinese ban on cryptocurrency services added downward pressure on the cryptocurrency market, and, eventually, on the Coinbase stock.

  • New partnerships:  Apple Pay and Google Pay

Coinbase shares reacted positively to the news that the USA’s largest crypto platform signed an agreement with Apple (AAPL) and Google (GOOG) payment networks. This means that US customers can now use their debit Coinbase cards with Google Pay and Apple Pay to easily spend cryptocurrency holdings on the go, and even start earning up to $4 back in crypto rewards.

Coinbase explained that it will automatically convert cryptocurrencies to US dollars and send the funds to the owner’s Coinbase card for withdrawals and purchases.

COIN stock trading: trader sentiment

Coinbase stays at the forefront of the cryptocurrency industry, and the growing adoption of cryptocurrencies, especially bitcoin and ethereum, bodes well for the COIN stock price prediction and traders’ sentiment.

Wedbush analyst Dan Ives wrote in a note to clients, as reported by Bloomberg:

“Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years.”
On 15 February Investing.com the monthly technical analyses for Coinbase share trading based on moving averages in January 2022 offered four buy and eight sell recommendations; weekly technical indicators showed nine sell and no buys. Overall, the February monthly Coinbase sentiment from investing.com was sell.

Coinbase stock price prediction: algorithm-based forecasting services

According to TipRanks’ latest Coinbase stock prediction, based on 15 analysts offering year-long price targets, the average price target for COIN was $347 with a high estimate of $444 and a low of $220. Analysts ranked the stock as a Moderate Buy.

At the time of writing (15 February) Coinbase was trading at around $195, and analysts from CNN Money shared positive sentiment on COIN stock, rating it as a Buy.

According to its COIN stock price prediction, the median price was $342 within the next 12 months. The highest analyst’s target for COIN was $600 and the lowest is $220.

Analysts from WalletInvestor considered Coinbase as a Good long-term investment. It gave it a $262.4 median price target for the next 12 months. According to its Coinbase stock prediction 2027, the stock’s price could hit $405.6 in a five-year period.

Don’t forget that stocks’ past performance does not promise returns in future. Individual analysts or algorithm-based forecasting services can get their predictions wrong. Which analysts you choose to believe is down to your own view of the Coinbase stock predictions.

Should I buy Coinbase (COIN)?

There are several reason why traders may consider investing in Coinbase stock:

  • Relation to the cryptocurrency market.

Coinbase stock is a traditional NASDAQ-listed stock, whose underlying business is directly related to the cryptocurrency market. Operating as one of the largest US-based cryptocurrency exchanges, Coinbase stoсk performance is affected by the volatility of the cryptocurrency market.

Although it could be a double-edged sword for long-term investors, Coinbase stock could bring good trading opportunities for short-term CFD traders, who can benefit from COIN price fluctuation in either direction.

  • Mainstream cryptocurrencies adoption

In general, people are becoming more aware of what cryptocurrencies are and how they operate. Coinbase contributes to making digital currencies accessible to the general public.

According to the “Global Blockchain and Cryptocurrency Market 2021” research, “Cryptocurrency is gaining momentum globally, with developing markets setting the trends”. The report indicates that by 2030, “blockchain technology is expected to be a significant contributor to the global GDP, lifting it up to $2 trillion”.

Should I sell Coinbase (COIN)?

  • Increased cryptocurrency volatility

The cryptocurrency market has been going through another turbulent period triggered by the Chinese ban of cryptocurrency services. According to Forbes as of 19 May 2021, Coinbase, Binance and some other crypto exchanges were forced to restrict trading or even crashed during a massive sell-off that cut around $700 billion off the cryptocurrency market.

A big part of Coinbase’s revenue comes from commissions from cryptocurrency trading. The company earned 83% of its $1.8 billion revenue for the Q1 2021 from retail transaction fees. Therefore, falling crypto prices can significantly affect Coinbase’s financial results.

Coinbase could be considered as a first-mover when it comes to processing cryptocurrency transactions, but the competition is growing, with new brokerage companies offering low-cost or even commission-free trading services.

According to the Mizuho investment bank commentary:

“Over time, COIN’s fees may face downward pressure from competing platforms following the footsteps of zero-commission stock trading because platforms like PayPal and Cash App primarily use crypto trading products as engagement tools.”

Therefore, if or when Coinbase has to cut its trading fees, it will impact the company’s profitability – regardless of bitcoin (BTC) and other cryptocurrency prices.

Still, whether you should buy or sell Coinbase (COIN) stock is your decision, based on the information available from your personal research, your risk appetite, the spread of your portfolio and any hedging you have in place, taking into account how much you are prepared to put at risk.

Traders should devise their own trading strategy and identify personal investing goals. We suggest doing thorough research before every trade, considering fundamental and technical analyses, a range of expert opinions and the latest market trends. This will help you to decide if a particular stock fits your investment portfolio.

Big backers and holders of Сoinbase stock

Brian Armstrong Brian Armstrong

Coinbase CEO and Co-founder

Owned 2.7m Class A and 36.9m Class B Coinbase shares as of the company’s market debut, according to the company’s prospectus.

“Coinbase’s mission is to create an open financial system for the world. This means we want to use cryptocurrency to bring economic freedom to people all over the world”.

Coinbase blog

20 September 2020

Fred Wilson Fred Wilson

Union Square Ventures

Owned 14.9m Class B shares

Invested $5m at a price of $0.20 per share

“We have been thinking about and looking to make an investment in the Bitcoin ecosystem for several years. Today, we are happy to be able to talk about our first investment in the sector. Coinbase is where I have purchased my bitcoin and keep it”.

Union Square Ventures site
8 May 2013

Marc L. Andreessen Marc L. Andreessen

Andreessen Horowitz

Owned 5.5m Class A shares and 23.9m Class B shares

According to the Coinbase prospectus, Andreessen Horowitz and its affiliates own more than 5% of outstanding capital stock.

Frederick Ernest Ehrsam III Frederick Ernest Ehrsam III

Coinbase Co-founder and Board member

Owned 2.5m Class A shares and 15.1 Class B shares

“When Brian Armstrong and I started Coinbase in 2012, a bitcoin was worth $6 and only known by a few nerds on the internet. Bitcoin was the crazy idea that the world could have digital money for everyone.”

Twitter
April 14, 2021

Garry Tan Garry Tan

Founder of Initialized Capital

Invested $300,000 in Coinbase in early 2013 at $0.15 per share. This translated into a stake of 0.66% in the cryptocurrency exchange at the time of its IPO, the company confirmed to Forbes. At a COIN price of $328 at the end of its first trading day, the stake was valued at $680m.

“I feel like now I have the golden ticket. What I’m excited about is how we build the next big platform, and have that actually mean something.”

Forbes
27 September 2020

Coinbase short traders

According to the data analysis by MarketBeat, the most recent Coinbase (COIN) short trades include:

Coinbase short traders

Coinbase stock history

5 June  – 5 July 2021 Sideways trading around $230-250.
7 May  – 7 June 2021 COIN stock lost 23% of its value, moving down from $302.00 to around $230.00 at the beginning of June 2021
14 April – 6 May 2021 Coinbase gradually descended from $328.28 to $253.46 but rebounded to $302.74, gaining back 19% on 11 May 2021.
14 April 2021 Coinbase stock floated on the NASDAQ stock exchange via direct listing. Ahead of the listing, the COIN reference price was set at $250.00, but the stock launched at $381.00 per share.

The COIN stock price immediately surged to $429.54, before falling to $328.28 by the end of its first trading date, having lost 23.5%

Warning: past performance is no guarantee of future performance.

Coinbase profile: everything you need to know about COIN

Coinbase was founded in 2012 by co-founders Brian Armstrong, formerly an engineer at Airbnb (ABNB), and Fred Ehrsam, a former trader at Goldman Sachs (GS). They aimed to make it easy for anyone with an internet connection to send and receive bitcoin (BTC) securely through a simple and intuitive platform.

Today, Coinbase operates one of the world’s largest cryptocurrency exchanges. It lists more than 90 cryptocurrency assets for trading.

The platform had around 73 million verified users in over 100 countries as of 31 January 2022 trading around $372bn last quarter and has $255bn of assets on the platform.

Early investors in Coinbase included Y Combinator, an incubator that provided startup funds, Union Square Ventures, Andreessen Horowitz, Ribbit Capital, Spark Capital, Greylock and MUFG.

Coinbase stock went public on the NASDAQ via direct listing on 14 April 2021, to capitalise on rising interest in cryptocurrency trading. The company opted for a direct listing rather than a traditional initial public offering (IPO). Unlike an IPO, in which underwriters issue and price new shares, a direct listing company involves executives and other investors selling some of their shares to the market directly.

Coinbase

The company operates two platforms – its basic Coinbase service acts as a wallet for users to buy and sell cryptocurrencies, while its Coinbase Pro service, which operates in the US, UK and Europe, offers a professional trading interface with more advanced features.

Customers tend to start by buying cryptocurrencies on the Coinbase platform and then go on to use its other products to stake coins and tokens to collect interest, earn savings rewards and borrow funds against their holdings.

Coinbase expanded beyond bitcoin in 2016, adding support for ether (ETH), the world’s second-largest cryptocurrency. It continues to add new digital coins and tokens to its platform in response to growing liquidity.

In 2018, the company launched Coinbase Ventures, an early-stage venture fund, to invest in cryptocurrency and blockchain startups. The company has since invested in more than 70 companies, including blockchain protocol developers, decentralised finance (DeFi) applications and non-fungible token (NFT) exchanges.

The exchange is increasingly being used by institutional investors as they seek to gain exposure to cryptocurrencies on behalf of their clients. Since the beginning of 2021, the company has experienced a 170% growth in institutional investors piling into the cryptocurrency market, the company shared in its earnings call.

Coinbase had around $45bn of institutional investments in December 2020m and managed to increase this number to $122bn in the first quarter 2021. According to Drew Robinson, Head of hedge fund sales at Coinbase:

“Over the last 12 months, we have seen a growing interest from institutional investors seeking to take advantage of the crypto space. However, this year, interest from pension funds and hedge funds has skyrocketed.”

In late April 2021, the company added support for US customers to buy cryptocurrencies on Coinbase using payments platform PayPal (PYPL).

The firm also announced the acquisition of institutional data analytics platform Skew as it looks to tap into the growing market of institutional investors.

Coinbase Influentials

  • Brian Armstrong
    Co-founder and CEO at Coinbase
    Twitter
  • Cathie Wood
    Founder, CEO and CIO at ARKInvest
    As of 16 June 2021, ARKInvest’s accumulated Coinbase stock holdings comprise 4.63m shares. The COIN stock became one of the top ten holdings in ARK’s Innovation fund.
    Twitter

FAQ

 

Should I buy Coinbase stock?

 

Coinbase stock is closely connected with the cryptocurrency market. Therefore, the highly volatile nature of cryptocurrencies may affect the price of the COIN stock.

If you are willing to trade on the Coinbase stock price fluctuations with CFDs, follow the interactive Coinbase stock chart, do your own technical and fundamental research and decide whether the cryptocurrency exchange fits your investment portfolio.

Author: Capital
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