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, 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.
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.
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”.
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.
Cryptocurrency is having a material impact on traditional finance, stocks, and markets more than ever. It is arguably no longer an isolated ecosystem, divorced from anything other than indeterminable mania and depressions.
Supporting this supposition are the developments in the crypto space just this year; several crypto-backed ETFs became tradable in North America, Bitcoin appeared on the balance sheet of several Fortune 500 companies, and crypto-exchanges have achieved public listings. Speaking of the devil, the Nasdaq listed Coinbase Global Inc (NASDAQ: COIN) has reported its earnings today, comfortably beating its earnings expectations.
Fittingly, I plan to mark the occasion by crafting one of my periodical recaps of the crypto space.
The largest crypto exchange in the US, Coinbase, has reported Q2 earnings above expectations (total revenue of US$2.2 billion vs US$1.85 billion expected). Coinbase’s revenue growth is impressive considering that since the Company’s last earnings report, Bitcoin and its ilk have taken a nosedive in price.
Interestingly, Coinbase was able to increase its monthly user base and the value of processed transactions. All the while, the value of the crypto assets that were being traded declined by approximately 20%. In reward, Coinbase stock climbed 0.82% in afterhours trading, after it released its earnings report (however, the stock dropped 3.85% over Tuesday trading).
Further proving my point of Cryptos infiltration of mainstream finance, Coinbase reported that more than 9,000 financial institutions are included in their client base.
AMC has announced, alongside its earnings report, that it will begin accepting Bitcoin by the end of the year. I suspect the announcement was for two important reasons. The first, to help distract from the bad earnings report. Admittedly, the theatre lost less than expected, but the report was still less than desirable (US$0.71 vs US$0.94 expected loss per share). The second reason is to appeal to its meme investor base (like GameStop’s foray into NFTs). However, unlike GameStop’s foray into NFTs, AMC move into Bitcoin is far more practical and has the potential to pay off in the long term (predictions of Bitcoin reaching 100K are rearing their heads again). As of writing, Bitcoin is comfortably above 45K, after spending the beginning of August sub-40K.
The amendment sought to clarify language regarding who would have to abide by the new reporting requirements.
As it stands, Crypto advocates believe the tax rules are too broad and would lead to some entities being unable to comply because they are not privy to the information that is required to be reported. Ultimately, the US cryptocurrency space will be profoundly negatively impacted. This is an opinion shared by Coinbase CEO Brian Armstrong and Kraken CEO Jesse Powell, who believe cryptocurrency firms are likely to shift overseas in response.
Approximately US$600 million worth of Crypto has been hijacked from the Defi platform, Poly Network. The hackers siphoned off Ethereum, Shiba Inu, Wrapped Bitcoin and USD coin, among others.
While the coins are likely irretrievable, some measures can be taken to ensure that the hackers don't personally profit from the attack. Poly has called on the miners to blacklist funds coming from the hacker's address. I'm unsure if such an action would set a precedent. At any rate, decentralised projects have been known to roll back transactions made during hacks. In this instance, the founders of Tether, a decentralised coin, has already stepped in and frozen US$33 million worth of coins associated with the hacker's addresses.
The largest Crypto exchange in the US, Coinbase, is preparing to join the Nasdaq this week. Coinbase is the first exchange to go public and the listing can be considered another big step toward the mainstream adoption of cryptocurrency. The listing day is Wednesday 14, and the Company could not have picked a better time. That is to say, Crypto prices are currently performing exquisitely.
The estimated valuation of Coinbase is as high as US$100 billion. A valuation this high would put the exchange on equal footing with Facebook when it listed back in 2012. Interestingly, Coinbase could catch up to Facebook’s current valuation of US$900 billion. This would be possible if the price of Bitcoin and Co. increases at the same miraculous rate experienced in 2013 and 2017.