Crypto collapse dents equities: Coinbase hits new lows, loses 90% value

Synopsis

Till trust returns to the crypto ecosystem, one can expect Coinbase stock price to stay muted, said Nigam. “Institutional investors are reconsidering the asset class given the recent controversy,” he added.

Amid FTX collapse and consequent fallout faced by the industry, US-listed cryptocurrency exchange Coinbase hit a new record low earlier this week.

The stock, which lost 90% of its value in the last one year, has failed to visit $400-mark last hit at listing. The company’s valuations were more than $100 billion back then.

Swastik Nigam, Founder & CEO, Winvesta said the FTX saga has resulted in a significant drop in trust in crypto as an asset class and the security around how it is held.

“As Coinbase’s revenues are directly linked to the activity in crypto and its forward outlook, the stock price has cratered,” he added. The stock tumbled 10% on Monday only to recover some ground on Tuesday.

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View Details »Coinbase announced a $545 million loss and a revenue drop of more than 50% in the third quarter compared to the same period last year earlier.

Viram Shah, Co-founder and CEO, Vested Finance said, recently Bank of America downgraded Coinbase, citing ‘contagion risk’ for the cryptocurrency exchange platform amidst the fall of FTX.

“Concerns regarding the stability of FTX’s competitor exchanges have sparked industry-wide selloffs, causing some companies to temporarily cease trading and others to prepare for possible bankruptcy filings,” he added.

In one of the most difficult years for crypto markets, there has been a wealth erosion of about $2.2-$2.5 trillion from its market capitalization.

Coinbase remains an active counter on Vested Finance’s platform as its trading volume has increased about 18% in the last one week, whereas buying volumes have jumped 48% during the same period.

Till trust returns to the crypto ecosystem, one can expect Coinbase stock price to stay muted, said Nigam. “Institutional investors are reconsidering the asset class given the recent controversy,” he added.

In the last one year, Bitcoin has crashed more than 75% to the $16,000 mark from $69,000 levels, whereas other top crypto tokens including Terra (LUNA) have turned into junk, washing out billions of dollars.

Crypto companies can be broadly classified into three categories — ones that make money from trading of crypto (Coinbase, Robinhood); those who hold crypto in their treasury holdings (MicroStrategy); and those who mine crypto (Hut8).

Shah from Vested Finance expects that the first and last categories will be the worst hit as the second category can generate revenue from other sources as well.

It now has become a cliche that investments in crypto stocks are volatile and investors should invest according to their risk appetite.

“While their strategy would depend on individual players, investors may hold on to crypto stocks if the fundamentals are in place, as it may be a long-term bet worth taking,” added Shah.

(Note: Both Vested Finance and Winvesta are not trading advisory platforms. They neither recommend nor endorse crypto trading in any sense.)

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times) Print EditionPrint EditionWednesday, 23 Nov, 2022Experience Your Economic Times Newspaper, The Digital Way!Read Complete Print Edition »

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    Updated: 11/23/2022 — 09:00