Bitcoin
Coinbase is down 9% this month in line with Bitcoin’s decline
Even with gains as of midday Tuesday exceeding 4% to nearly $222, shares on the cryptocurrency exchange Coinbase are down about 13% since June 12, when they closed around $255. During the same period, Bitcoin prices fell about 9% to approximately $62,000.
The equally weighted S&P 500—the version of the index that does not distinguish between the market capitalization of companies—grew a modest 0.27% this month, but it still highlights how the stock market is underperforming compared to the broader market.
However, it is also important to note that Coinbase is still in the midst of a huge comeback. The crypto market has recovered enormously since the end of last year, and Coinbase, the world’s largest market second largest exchange, has had something of a renaissance thanks to rising transaction revenues. Despite the recent drop in share price, Coinbase shares have soared year-to-date alongside Bitcoin – up more than 40%, with the original cryptocurrency achieving similar gains.
When Coinbase shares fall, it’s often a reflection of digital assets taking a big hit, given how much of the company’s revenue comes from trading fees. In the first quarter of the year, transactions carried out 67% of revenue. On Monday, volume of business was $788.3 million, while on March 4 it was almost $3.2 billion.
“Volume fell a little and the price came back a little from the peak of the first quarter. Then [Coinbase] will have 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 are down about 11%, 9%, and 18%, respectively, and each has failed to gain momentum since mid-March. One of the main reasons is the sluggish performance of the 11 spot Bitcoin exchange-traded funds that the SEC approved in January. Since then, the price of the underlying asset, Bitcoin, has ebbed and flowed with large sums moving in and out of these products. The latest series of net outflows from ETFs began on June 10 and continued every day except one, totaling about $1.3 billion, according to CoinGlass. data. It is the biggest period of departures since the products were launched.
The departures don’t just affect Coinbase because of its ties to Bitcoin, the company is the custodian of eight of 11 ETFs, for which you receive a fee of 0.2%. The outflows mean they are holding less Bitcoin, generating less revenue.
Additionally, Coinbase holds US$207 million value in 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 drop 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 flock to Bitcoin and Coinbase. And vice versa: When sentiment dies down and dies down, people flock to Coinbase.”