In April 2021, the cryptocurrency exchange Coinbase Global successfully listed on the Nasdaq. Soon after, the company’s valuation soared to the $100 billion range. In the words of FundStrat Global Advisors analyst Leeor Shimron, “The Coinbase listing is groundbreaking. Yes, it can even be regarded as a watershed in the crypto industry.”
Coinbase has always been the “wind vane” of global crypto entities, and has also received strong support from the well-known venture capital firm Andreessen Horowitz ( a16z ), which currently holds about 25% of Coinbase’s Class A shares and 14% of Class B shares.
However, in the past 6 months, Coinbase’s stock price has fallen like a free fall, from $381 in November 2021 to $48 on July 5, 2022, and its market value has plummeted to the $10 billion range. Goldman Sachs has now downgraded the company to “sell” from “neutral” and lowered its price target to $45 from $70.
Looking back at Coinbase’s business operations over the past six months, it is not difficult to find that its total transaction volume in the first quarter of 2022 was $309 billion, a staggering 44% decline compared to the $547 billion in the fourth quarter of 2021; not only that , its retail transaction volume also fell by more than 50%. In comparison, two other exchanges, FTX and Binance, fared much better.
A former Coinbase employee called the recent slump in Coinbase’s stock price extraordinary, because usually when cryptocurrency prices fall, the exchange’s trading volume tends to surge, and Coinbase’s performance in recent quarters has defied this. law. The reason is probably not as simple as being affected by the encryption winter.
As a Nasdaq-listed cryptocurrency exchange, Coinbase actually fell nearly 10 times in more than half a year, which not only caused market panic, but also triggered thinking about some key issues around the world:
1. What impact will this shrinkage have on the global crypto market?
2. Is an IPO the right direction for an unregulated crypto entity?
Coinbase’s sluggish performance in the stock market may cause crypto companies to stop trying IPOs
On July 15, Mizuho equity analyst Dan Dolev said in a note to clients that Coinbase is expected to trade around $1.2 billion in July, up from a high of nearly $7 billion in November 2021. Down nearly 83 percent, its market share has fallen to 2.9 percent from 5.3 percent in the first quarter. Dan Dolev said that Coinbase ranked 14th in average transaction volume in July, compared to the 4th place in November last year. Dan Dolev has a neutral rating on Coinbase stock, with a price target cut to $42 from $45.
In fact, Coinbase could have opted for an ICO (Initial Coin Offering) last year, which was also valued at $100 billion, but the company hoped to raise funds from institutional investors, so it opted for an IPO. However, many crypto companies understand that once they choose to go public, they must operate in a structured way, and that means there will be greater transparency and trust in how the company operates.
On the other hand, Coinbase’s recent free-fall in the market has discouraged people who wanted to invest in crypto companies. To make matters worse, the SEC has also not allowed Coinbase to issue multiple products that it has been running for several months. For all these reasons, the chances of a crypto company IPO in today’s environment are all but remote, at least in a year.
Coinbase layoffs create ripple effect in crypto industry
Affected by poor operations and a “bear market” in the global crypto market, Coinbase took the lead in making the decision to slow down the pace of global recruitment. According to Emilie Choi, the company’s president and chief operating officer, it was originally planned to triple its headcount this year, but given the current market conditions, the company believes it is prudent to slow down the pace of hiring and reassess staffing needs in line with the company’s highest-priority business goals. so the target has been shelved. Not only that, but the company has also streamlined some of its overseas teams and recalled some overseas business leaders to its U.S. offices.
As one of the most in-demand companies in the crypto space, Coinbase’s move to hold off on hiring has been followed by many of its peers, who have also suspended hiring plans, citing the coming crypto winter.
It is worth mentioning that Coinbase not only suspended the recruitment plan, but also slowed down the speed of overseas investment. In fact, Coinbase has been focusing on investing in various areas of the cryptocurrency ecosystem, especially investing in some overseas startups that compete with its products, expecting win-win results. Before the bear market, Coinbase invested heavily. Taking the Indian market as an example, Coinbase invested $150 million in more than a dozen companies in India, including ZebPay, CoinDCX, CoinSwitch Kuber, Vauld, etc., and also acquired Agara. However, since Coinbase usually participates in seed round financing and does not serve as a lead investor, the investment scale generally ranges from $100,000 to $1 million, so the impact on the overseas encryption ecosystem is not very serious.
Finally, due to industry regulation issues and pressure from overseas regulators, Coinbase’s UPI payment business in some countries was suspended, which also disrupted their plans to expand overseas markets. Therefore, how to operate normally in a regulated environment is still an art for many crypto companies, and it is also crucial to pay attention to customer data, customer sentiment and customer experience, and only then will it be trusted by investors and users.
Leading companies are sluggish, will the crypto winter continue for at least another 12 months?
Although the industry is sluggish, the computing power of Bitcoin has not dropped significantly, the number of transactions per second per block has also remained high, and the total number of Bitcoin addresses has also exceeded the 1 billion mark. However, at the price level, Bitcoin, Ethereum The performance of cryptocurrencies and other cryptocurrencies has not been satisfactory, and the downward trend has lasted for nearly 9 months. Many industry insiders believe that this may be the longest cryptocurrency winter since 2018.
Tom Loverro, who served on the Coinbase board until 2021, sees the cryptocurrency market downturn continuing throughout 2022 before returning to “basically flat” in 2023, while macro market improvement may take until the second half of 2023 To get the first glimpse.
Frankly speaking, the bear market of 2022 is very different from the post-Covid-19 market crash of 2020, the latter was just a black swan event and investors saw the market rebound, while it is currently a cold winter, mainly due to the extreme It may be the result of continued interest rate hikes by the Federal Reserve, which means investors may face continued losses until U.S. interest rates stabilize. Tom Loverro suggested that crypto companies need to reserve enough cash to face the market downturn in the next 30-36 months, ” more importantly, have enough confidence to get through the winter, don’t waver or give up easily, once the market recovers, the encryption Money will be bigger than ever. ”
On the other hand, Coinbase is actually ready for a long runway, and although many employees have been laid off, these departures have been generously compensated. Not only that, Coinbase has also “low-key” launched international market expansion to drive growth, and registered in Italy, Spain, France and the Netherlands. So, can other crypto companies survive this crypto winter? Maybe only time will give us the answer.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/will-coinbase-be-the-next-drag-on-the-crypto-market/
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