Bitcoin
Coinbase shares are down around 13% in 2 weeks alongside Bitcoin’s drop
Even with gains as of midday Tuesday exceeding 4% to nearly $222, shares of the cryptocurrency exchange have made similar gains.
When Coinbase shares fall, it’s usually a reflection of digital assets in a big way, given how much of the company’s revenue comes from trading fees. In the first quarter of the year, composite transactions 67% of revenue. On Monday, volume of business was $788.3 million, while on March 4 it was almost $3.2 billion.
“The volume dropped a lot, and the price returned 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 longest period of exits since the launch of the products.
The exits 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 more than 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 thinks the biggest factor in Coinbase’s recent stock drop is “sentiment,” with so many of the company’s shares held by retail traders: “When you have a lot of noise and activity in the digital asset space, people rush for Bitcoin and Coinbase. And vice versa: when sentiment dies and slows down, people run out of Coinbase.”
This story was originally featured in Fortune.com