Coinbase is a Contrarian Investor’s Fever Dream
Should you invest in the cryptocurrency exchange after its tumultuous tumble?
Coinbase raised the bar for falling knives everywhere when the crypto exchange saw its share price sink from $151 in mid-April to just a hair under $54 by mid-May.
It’s down 62% in the last three months and has fallen even more — 75% or so — in the last year. Coinbase hit a 52-week high of $368.90 in November of 2021 and an all-time low of $40.83 just last month.
Coinbase has been languishing in the mid-$50 range for the past month and, as sentiment continues to sour, I can’t help but think now might just be the perfect time to grab some shares of COIN.
For Coinbase CEO Brian Armstrong, the ride up must have felt like a dream, the ride down a nightmare, and, looking back, it all probably felt as vivid and somewhat scary as a fever dream.
Coinbase has earned this selloff
Up until the last few years, Coinbase was the go-to exchange for most crypto investors. It’s still one of the biggest, but Binance and FTX are coming for some of its market share.
While the exchange side of the business was booming (remember, Coinbase makes most of its money from transaction fees when investors buy and sell crypto on its platform) it hired a ton of new employees to keep pace. When the crypto craze started to cool in general, though, so did Coinbase’s revenue.
From there, it’s been an avalanche of sentiment-slashing stories, one after another, after another.
Many of the newly-hired employees became newly fired, and some were handed job offers Coinbase later rescinded.
As if that’s not bad enough, Coinbase spent a bunch of money building out new features that, well, really aren’t catching on.
Coinbase NFT is a train wreck
Have you taken a peek at Coinbase NFT, recently? It was supposed to be Coinbase’s answer to OpenSea, the world’s first and largest NFT marketplace, but no one seemed to notice on launch day … or the first few weeks … or even the first few months.
The Coinbase NFT marketplace waitlist had more than 2.1 million people foaming at the mouth (you would think) for a chance to spend way too much money on non-fungible tokens of animated animals (apes, cats, take your pick, there’s something for everyone).
Coinbase undoubtedly spent some significant time, energy, and money, whether it be crypto or cold-hard cash, to build its NFT marketplace — a marketplace that saw just 4,132 people make transactions in the first 19 days.
To pour a little more salt on the wound, like jumping into the ocean with a million tiny papercuts, GameStop’s Ethereum-based NFT marketplace saw more than twice the all-time trading volume of Coinbase’s just two days after launch … while it was still in beta and not even selling gaming NFTs, which the company says will become its core offering.
Crypto’s collapse has only compounded the problems at Coinbase
Coinbase has some company-specific issues, but cryptocurrencies and crypto companies of all shapes and sizes have been feeling the pain.
The fall of Terra and its $60 billion ecosystem reverberated through the entire crypto landscape.
Axie Infinity was hacked to the tune of $620 million, and it all started with something as simple as a fake job offer from North Korean hackers.
Celsius filed for bankruptcy because it owes users $4.7 billion it doesn’t have.
Voyager, another crypto broker that filed for bankruptcy, caught Rob Gronkowski and Mark Cuban in the mess it’s created.
I could keep going, but I think you get the point. And what did you expect? The crypto landscape, for as far as it’s come in the last handful of years, is still the wild west. Regulation is still nonexistent in most corners of the space.
But, think like a contrarian for a second
Could things get worse for Coinbase? I think we all know the obvious answer is yea, they could. Could things get worse for crypto? Of course. Just because Bitcoin is down nearly 50% in the past three months doesn't mean it couldn’t fall another 50% in the next three. If you buy a Bitcoin at current levels ($20,000ish), it could still fall another 100%. Never assume an asset’s value will stop going down on the basis it’s already fallen enough.
Back to Coinbase.
What if there’s a resurgence in the broader crypto space sometime in the next few years. Some of the dominoes have already fallen, but by then most of the rug pulls and moon shots will be washed out of the system. In crypto, only the strong will survive. Those worth investing in when all the hype is gone, all the excess gets squeezed out, might actually be the future of finance.
And if crypto really is the future, then what? Then maybe Coinbase is the next J.P. Morgan Chase (JPM). Chase has a market cap of $331 billion. Coinbase has a market cap of $12 billion.
If we are taking out loans, buying homes and cars, and paying for everyday things with crypto (which you can already do with the Coinbase Card), you better believe Coinbase will be there as a leader in the space. The company is already enabling its 98 million customers to do most of those things right this very second.
And who knows, maybe the “Bill Murray 1000” will be able to breathe new life back into Coinbase NFT.
Need a Coinbase account? The good news, like most things these days, you can try it before you buy it.
Disclaimer: I’m a market participant, not an analyst. This is not financial advice. Also, there is indeed an affiliate link at the end of this post. If you sign up for Coinbase through the link, we’ll both get $10. Neat, huh?
