Coinbase (COIN) shares fell to a record low on Wednesday.
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“My view on Coinbase has never been as pessimistic as it is today.” Dan Dolev, senior analyst for fintech equity research at Mizuho, said on Yahoo Finance Live: “There are two things that can happen in front of you: a mild crypto winter, and I think this opportunity The rate is less than 50%, or something like an ice age for cryptocurrencies. I think if we enter an ice age for cryptocurrencies, it’s also a question of whether we can survive.”
The cryptocurrency trading platform reported a worse-than-expected first-quarter revenue, a bigger-than-expected loss, and a drop in monthly trading users to 9.2 million and continued to decline during the quarter.
Adding to the panic, its chief executive Brian Armstrong tweeted a required filing from Coinbase that revealed how the company would protect its custodial assets in the event of bankruptcy.
“Our disclosure on Form 10Q today about how to hold crypto assets has led to some speculation,” Armstrong wrote on Twitter. “Your funds at Coinbase are safe and will always be safe. We are not at risk of bankruptcy; however, We responded to the SEC’s request by adding a new risk factor called SAB 121, which is a new disclosure requirement for public companies that hold crypto assets for third parties.”
The company’s results, that announcement, plus negative sentiment about cryptocurrency volatility and theTerraThe implosion of Coinbase’s stablecoin appears to have sparked a perfect storm that sent Coinbase stock down.
The stock has fallen more than 80% from its November all-time high and is now trading at about one-fifth of its reference price of $250 when it goes public in April 2021.
Dolev sees Coinbase’s complete reliance on crypto as a problem, and he doesn’t think it’s an unsustainable business model to compete for crypto market share in the low-commission trading business. (For example, he has a buy rating on Robinhood, where customers can trade other assets.)
When on the conference call, Director of Operations Emilie Choi was asked if there was an opportunity to work withRobinhoodA type of corporate merger, she answered bluntly: Coinbase is a cryptocurrency company.
“We’re a cryptocurrency company, that’s who we are,” Choi said. “Everything we do is aimed at building the crypto-economy and promoting economic freedom. Therefore, we do not intend to offer traditional securities (businesses) unless this will in some form greatly accelerate the adoption of cryptocurrencies.”
There are many analysts who believe the consequences of the current slump have been exaggerated: 22 of them still have a “buy” rating, compared to 5 and 4 for a “hold” (eg Dolev) and a “sell” respectively .
Among the long-term bulls is Oppenheimer’s Owen Lau.
“Although economic challenges such as inflation and supply chain restrictions may put COIN under pressure in the short term, based on fundamentals: 1) The use of cryptocurrencies continues to increase; 2) COIN assets are of high quality and can withstand storms; 3) COIN Performance continues to diversify, making it attractive for long-term investments,” he wrote in a report following Coinbase’s results.