Markets
Coinbase is down 9% this month, in line with Bitcoin’s plunge
Even with gains through midday Tuesday above 4%, to nearly $222, shares of the cryptocurrency exchange Coinbase they are down about 13% since June 12, when they closed around $255. Over the same time frame, Bitcoin prices fell by about 9% to around $62,000.
The equally weighted S&P 500 Index—the version of the index that does not distinguish between the market capitalization of companies—has risen a modest 0.27% this month, but nonetheless highlights how the exchange is underperforming the broader market.
However, it is also important to note that Coinbase is still in the midst of a major comeback. The cryptocurrency market has seen a strong rise since the end of last year and Coinbase the world market the second largest exchange, has enjoyed something of a renaissance thanks to a surge in transaction revenue. Despite the recent share price decline, Coinbase shares have skyrocketed year-to-date along with Bitcoin: up more than 40%, with the original cryptocurrency achieving similar earnings.
When Coinbase stock tumbles, it’s often a reflection of digital assets in general, as much of the company’s revenue comes from trading fees. In the first quarter of the year, transactions recovered 67% of revenues. On Monday, trading volume it was $788.3 million, while on March 4 it was nearly $3.2 billion.
“Volume has pulled back a little bit, and price has somewhat returned from the first quarter peak. SO [Coinbase] will achieve lower profitability in the second quarter,” Paul Gulberg, senior equity analyst at Bloomberg Intelligence, told Fortune.
“Lots of noise and activity”
Over the past 30 days, Bitcoin, Ether, and Solana have fallen by about 11%, 9%, and 18%, respectively, with each having failed to gain momentum since mid-March. One of the main reasons is the lagging performance of the 11 Bitcoin exchange-traded funds approved by the SEC in January. Since then, the price of the underlying asset, Bitcoin, has been up and down, with large amounts flowing in and out of these products. The latest round of net outflows from ETFs began on June 10 and has continued every day except one, totaling about $1.3 billion, according to CoinGlass. data. This is the longest period of outflows since the products debuted.
The outflows aren’t unique to Coinbase due to its ties to Bitcoin, of which the company is a custodian eight of the 11 ETFs, for which he receives a commission of 0.2%. Outflows mean they hold less Bitcoin, therefore generating less revenue.
Furthermore, Coinbase is holding out $207 million value of Bitcoin, making it the public company with the sixth largest exposure. Shares of MicroStrategy, the company that holds the majority of Bitcoin, have fallen about 8% since June 12.
However, Gulberg believes the biggest factor in Coinbase’s recent stock decline is “sentiment,” with so many of the company’s shares held by retail traders: “When there’s a lot of noise and activity in the digital asset space, people rush to Coinbase. And vice versa: when sentiment dies and slows down, people rush out of Coinbase.”