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Coinbase: A year in review on the Nasdaq

Coinbase (NASDAQ:COIN), the cryptocurrency exchange platform that is facing a class action lawsuit over its alleged listing of unregulated securities, on Wednesday fell 43% from its peak since it went public on the Nasdaq stock exchange nearly a year ago.

The stock is down 21% from the reference price of $250 set by the Nasdaq when it debuted in April 2021. The IPO valued Coinbase at $49.8 billion and marked the first major cryptocurrency company to go public on a US stock exchange.

However, Coinbase’s stock price has since swung to as low as $160 earlier this month amid the volatile cryptocurrency market, uncertainties over regulations on digital currencies and a massive class action lawsuit over its alleged sale of securities not registered with the US Securities and Exchange Commission.

The lawsuit alleges that Coinbase, since October 2019, has been letting customers trade 79 cryptocurrencies without disclosing that they are in fact securities.

Coinbase in numbers

Coinbase, established in 2012, allows users to trade cryptocurrencies like Bitcoin and Ether in exchange for a transaction fee. Last year, the platform’s monthly transacting users quadrupled from 2020 to 11.4 million.

The company raked in $7.36 billion in revenue in 2021, up 545% from $1.14 billion in 2020, while net income soared elevenfold to $3.62 billion from $322 million.

Coinbase attributed its strong performance to the booming crypto market. The market capitalization of cryptocurrencies over 2021 surged threefold, closing at $2.3 trillion, but down from a peak of $3.1 trillion in November 2021. Bitcoin’s market cap by 2021-end hit almost $1.3 trillion.

Coinbase (NASDAQ:COIN) vs Bitcoin

Tied to Bitcoin price

As a cryptocurrency exchange, Coinbase’s stock performance is tied to the price of Bitcoin and other major digital currencies, which means that if crypto markets collapse, it would likely hammer Coinbase’s stock price.

Both Coinbase and Bitcoin reached their peaks in November 2021. Bitcoin traded near $70,000 at the time but has since fallen to around $45,000 in recent months as traditional investors appear to shun digital assets.

Regulatory woes

Although Coinbase as a listed exchange platform is regulated by US laws, cryptocurrencies still have a long way to go in terms of regulations.

In the US, the Biden administration recently issued an executive order directing the government to come up with a plan to regulate cryptos, but in Europe, the market is headed for tighter regulations as lawmakers are set to introduce new laws to curb suspicious transactions, among other reasons.

In a blog post on Monday, Coinbase’s Chief Legal Officer Paul Grewal said that if adopted, the EU’s planned crypto laws would "stifle innovation”.

The new Coinbase marketplace

Despite the crypto downturn this year and potentially tighter regulations, Coinbase remains bullish on digital assets, hinting at plans to launch its new marketplace for NFT or non-fungible tokens “soon”.

Coinbase NFT will allow users to buy, sell and check out NFTs through a peer-to-peer marketplace.

“What we liked right now and we’re observing the market is that NFT volume and price appear less correlated with other crypto assets,” Coinbase CFO Alesia Haas told analysts during the company's earnings call last month.

The company’s NFT plans could usher in a new revenue stream for Coinbase amid the volatility in cryptocurrencies.

Needham equity research analyst John Todaro expects Coinbase’s NFT ambitions would add an additional $1.26 billion in revenue for the company.

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