Coinbase Stock Falls to All-Time Lows and Bears See It Falling Further


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Last week, US stock markets had their worst week since September. Cryptocurrencies weakened too and Coinbase stock (NYSE: COIN) fell to a new all-time low. Bears see COIN stock falling even further from these levels.

Coinbase stock is now down almost 85% for the year. While the stock has been under pressure for almost all of the year, the sell-off has only deepened after the FTX bankruptcy fiasco.

Coinbase emphasized during its Q3 2022 earnings call that its exposure to FTX is quite low. In its release, the company said, “Regardless of whether the Binance/FTX transaction completes, we have very little exposure to FTX and we have no exposure to its token, FTT.”

However, the bankruptcy and financial irregularities at the world’s second-largest cryptocurrency exchange dampened market sentiments. Many have called the collapse of FTX the “Lehman moment” for the cryptocurrency industry.

Coinbase’s CFO Alesia Hass echoed similar views and compared the collapse of FTX to the 2008 financial crisis. She however expressed hope that the FTX saga might lead to stronger crypto regulation globally.

Notably, there is a global chorus to better regulate cryptocurrencies. Market participants agree that better regulatory oversight of digital assets would help the market in the long term. There is a beginner’s guide to trading in cryptocurrencies.

Mizuho Downgrades Coinbase Stock, Sees It Falling Even Further

Mizuho downgraded Coinbase stock to underperform from neutral and lowered its target price from $42 to $30. Mizuho Managing Director Dan Dolev is apprehensive about the income that COIN gets from Circle’s USD coin.

Dolev said that the income accounted for 10-15% of Coinbase’s Q3 2022 revenues. He warned, “Our assessment of consensus estimates for interest income for COIN suggests that the Street is underestimating the potential risks.”

While Dolev does not believe that Circle would rescind its agreement with Coinbase, he said that the company might renegotiate the deal at better terms which would hit COIN’s revenues.

Coinbase’s revenues have anyways sagged and even its CEO Brian Armstrong recently admitted that the company’s 2022 revenues would be less than half of what they were in 2021.

COIN’s revenues and active users have plummeted over the last year. In Q3 2022, its revenues were $590 million which was less than half of what it posted in the corresponding quarter last year.

Jim Chanos is Short on COIN and Tesla Stocks

Jim Chanos, who has been among the perma bears on Tesla stock, revealed that he is also short on Coinbase. He however said that his bearish view on COIN stock is independent of the volatility in cryptocurrencies.

In his conversation on Twitter Spaces, Chanos said, “This isn’t about crypto prices. That’s not why we why we shorted the stock and that’s not why we remain short. I mean, crypto prices will obviously fluctuate. It’s really the business model that I don’t think people appreciate here.”

Notably, Chanos burned his fingers previously shorting Tesla stock. He is now again short on Tesla stock and said the company would see a sales deceleration. There are indeed concerns over the demand for Tesla cars and even some of the Tesla bulls are also getting apprehensive.

Morgan Stanley analyst Adam Jonas however continues to remain bullish on TSLA stock and believes that there would be a good buying opportunity near his bear case target price of $150. We have a guide on how to buy Tesla stock.

Some Analysts See FTX Saga as a Positive for Coinbase Stock

Meanwhile, while several Wall Street analysts lowered their target prices after COIN’s Q3 2022 earnings, many see the troubles at FTX and some of the other crypto exchanges as a positive for Coinbase stock.

Being a listed company, Coinbase’s finances are quite transparent unlike the privately held and unregulated exchanges. Coinbase has around $5 billion as cash and cash equivalents on its balance sheet which provides it with a cushion amid the continued crypto winter.

Last month, Cowen reiterated COIN as overweight and said its analysis shows that regulatory-compliant exchanges like Coinbase are gaining market share. We have a guide on how to buy Coinbase stock.

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