In the latest news, Shares of Coinbase Global Inc. (COIN) have been downgraded by analysts at Goldman Sachs after dropping crypto prices affected the exchange’s underlying business, highlighting the many challenges posed by the bear market.
The US crypto exchange has now seen its stock price drop in lockstep with Ether, Bitcoin, and the wider digital asset market. Goldman analyst William Nance stated in a note that they decided to downgrade the stock due to the “continued downdraft in crypto prices.” The analyst added:
“Coinbase will need to make substantial reductions in its cost base to stem the resulting cash burn as retail trading activity dries up.”
Based on a note published by Bloomberg, Coinbase still has 20 buy recommendations, 5 holds, and 5 sell ratings as of June 27, 2022. Stocks that have a buy rating are on analysts’ recommended list. On the other hand, the stocks with a hold rating are expected to perform almost at par with the general market while those with sell recommendations are calls to liquidate an asset.
Coinbase started trading on the NASDAQ stock exchange in April 2021 and rapidly exceeded its pre-listing reference price. The stock eventually peaked at $381. At these price levels, COIN had managed to fully diluted market capitalization of around $100 billion.
Nonetheless, COIN has been on a downward trajectory, dropping by 84% to less than $58 per share. The stock was 8% lower on June 27, coercing its market capitalization to below $15 billion. The Coinbase stock selloff happened in lockstep with dropping crypto prices. Since peaking at nearly $69,000 in November 2021, Bitcoin is currently down by almost 70% struggling to get back above $21,000.
Apart from its collapsing share price, Coinbase has been compelled to lay off about 20% of its staff and even gone as far as rescinding job offers. CEO Brian Armstrong said the possibility of recession might prolong the so-called ‘crypto winter’ and result in an extended period of adverse market conditions.
Based on previous reports, credit rating agency Moody’s recently downgraded Coinbase’s Corporating Family Rating to Ba3 from Ba2. Moody’s said that Coinbase’s revenue model is extensively tied to trading volumes that have dried up in recent months as a result of the mass exodus of retail traders.
