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Coinbase: All about the base!
Cryptocurrencies’ fate is yet to be decided; is it a boon or a bane? Adding to this undecided fate is the recent fiasco of Coinbase (COIN) in the stock market. On Monday, the share price of cryptocurrency exchange Coinbase sank to a new record low.
What Happened?
Classified as an asset, cryptocurrencies always have been and are likely to remain a controversial and criticised concept. Many countries are still trying to grasp the concept of this behemoth that has rocked the personal finance sector. Some of these countries (China, Bolivia and Algeria) have declared all crypto transactions illegal, and some have gone to the extent of referring to it as a ponzi scheme.
Coinbase confirmed its intention to become a public company in January 2021 and registered 114.9 million shares for public listing in March 2021, which was then delayed to April 2021. The company’s debut was not a glorious hit. Instead, on day 1 the stock fell 13.8% at close.
Through much of 2020 and 2021, Coinbase reported constant and rising profits, which peaked in Q2 2021. The company’s net income dropped in the second half of 2021. Starting in Q1 2022, the company has reversed course, with two quarters of significant losses that are reflected in its Q3 earnings as well.
Until early November, FTX was considered an industry stalwart. According to a company announcement published on Twitter on November 11, FTX, its sister company Alameda Research, and 130 associated businesses operating under the name FTX Group filed for bankruptcy after experiencing a liquidity crisis.
Despite the fact that Coinbase has no direct connection to the bankrupt cryptocurrency platform, the collapse of the FTX has significantly lowered the value of Coinbase's stock.
Coinbase has $15 million in deposits on FTX that were used to facilitate business operations and client trades. According to sources, the company has also chosen to write off the investment its ventures arm made as well as participate in the bankruptcy proceedings to seek a claim on those deposits. Additionally, after freezing customer assets, cryptocurrency lender Celsius filed for bankruptcy in July.
Is There Hope?
A company filing with the U.S. Securities and Exchange Commission in late October 2022 indicated that product, engineering and design teams are being reorganised within a product group structure in the wake of Surojit Chatterjee, former chief product officer exit. Chatterjee cited a need for a break while also specifying personal reasons.
The general consensus is that Coinbase stands out in the cryptocurrency market for its openness and conservative business strategy, which is centred on taking a small percentage of all trades that happen on its platform. Many find it difficult to imagine the cryptocurrency market without Coinbase.
Some investors and analysts claim that Coinbase's war chest of cash is one reason to think that it has plenty of time to prove itself. Analysts also stipulate confidence that Coinbase is antithetical to FTX. However, it is not immune to the fallout within the crypto ecosystem.
In the recent past, multiple analysts have lowered the target price for the company's stock, saying the falling cryptocurrency markets will put pressure on the company’s stock. The Coinbase stock lost more than 80% of its value this year. Will there be a change in the fate of cryptocurrencies? Only time will tell.
Market Reaction
COIN ended at $43.39, up 5.24%.Newsworthy 📰
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Disclaimer: The email content is prepared and provided by Winvesta India Technologies Ltd. for informational and educational purposes only and is not meant to represent trade or investment recommendations. Remember capital is at risk. Terms & Conditions apply.