The stock price of the US cryptocurrency exchange has dropped in line with the prices of Bitcoin, Ether, and the wider market for digital assets.
Goldman Sachs analysts have lowered Coinbase Global Inc. (COIN) shares after the exchange’s core business was negatively impacted by falling cryptocurrency prices, highlighting the difficulties the bear market brings.
According to Goldman analyst William Nance, the cause of the decline is the “continued downdraft in crypto prices,” as per a note that was acquired by Bloomberg. The analyst predicted that as retail trading activity decreases, Coinbase “will need to make substantial reductions in its cost base in order to stem the resulting cash burn.”
As of June 27, Coinbase still has 20 purchase recommendations, 6 holds, and 5 sell ratings, according to Bloomberg. Analysts’ suggested stocks are those with a buy rating. Hold ratings indicate that a stock will perform about in line with the market as a whole, whereas sell ratings are advice to sell an asset.
In April 2021, Coinbase started trading on the Nasdaq stock exchange. It rapidly outperformed its pre-listing reference price and eventually reached $381. At those prices, COIN’s market value was around $100 billion when completely dispersed. COIN, however, has been on the decline since November, falling 84% to less than $58 per share. On Monday, the shares fell 8%, bringing the market cap below $15 billion.
Coinbase shares have been losing value in line with the drop in cryptocurrency prices. Bitcoin (BTC) has declined about 70% since its November 2021 peak of about $69,000.
Coinbase has been compelled to quit around one-fifth of its workforce and has even revoked job offers in addition to its sinking share price. According to CEO Brian Armstrong, the possibility of a recession could stretch the so-called “crypto winter” and cause unfavorable market conditions for a long period of time.
The credit rating company Moody’s recently reduced Coinbase’s Corporate Family Rating from Ba2 to Ba3, as it was previously reported. As Moody’s pointed out, Coinbase’s business model is dependent on trading volumes, which have decreased recently as a result of the widespread departure of retail traders.