Coinbase stock (NASDAQ:COIN)
Thursday morning’s premarket trading saw a 7.2% decline in Coinbase stock (NASDAQ:COIN) after Cowen analyst Stephen Glagola downgraded the cryptocurrency exchange company from “outperform” to “market perform” due to a lack of insight regarding when the volume slump will end.
The analyst says that the business of Coinbase (NASDAQ:COIN), which gets 82% of its net revenue from retail users’ transaction fees over the past 12 months, depends on the value of cryptocurrencies as well as the volume and volatility of trading.
In a note to clients, Glagola said, “Given the macroeconomic environment and the risks of FTX contagion on the prices of crypto assets, COIN’s monthly trading volumes have been going down pretty consistently every month since November 2021, and it’s hard to see a stabilization or a rebound in retail trading volumes over 2023.”
He noted that the $35 billion total trading volume in December was 25% less than the $47 billion total trading volume in October.
Furthermore, since FTX collapsed, there is now a higher chance of SEC enforcement action. “We believe there is a risk to a large amount of COIN’s non-BTC/ETH trading volumes (36% of total) and assets under custody (31% of total) that could be designated securities by regulators, aggravating trade volume degradation,” he said.
The analyst also thinks that Coinbase (NASDAQ:COIN) will start a second round of layoffs at the beginning of 2023, which could amount to up to 40% of its staff, in order to adjust its cost structure to the fact that trading activity is going down.
In contrast to the Strong Sell rating given by SA Quant, the Market Perform rating is in line with the Hold rating given on average by Wall Street.
In other cryptocurrency news, Silvergate Capital (SI) stock fell in premarket trade after the company said it would cut jobs, take an impairment charge, sell debt securities, and take other steps to trim its portfolio because customers were pulling money out.
Harrison Schwartz, a blogger for SA, is still bullish on Coinbase (NASDAQ:COIN) because he thinks investors will flock to “safe haven” exchanges.
The self-proclaimed “good guys” of the cryptocurrency world, Coinbase, have recently started running ads in an effort to regain investor trust. The ads focus on how closely the government is watching Coinbase because it is based in the US instead of a more lax place like, say, the Bahamas. Research from the New York State Department of Financial Services shows that by the end of 2021, Coinbase will have gotten more than 100,000 alerts about supposedly wrong customer transactions. One blockchain bandit pretended to work for an undisclosed organization, but the exchange’s insufficient security measures allowed him to take $150 million from it:
- Authorities found out that the exchange let people sign up for accounts without doing enough background checks. This could have made it easier for people to launder money or pay for terrorist activities, so the company agreed to pay a $50 million fine. Coinbase will also need to spend $50 million to improve its compliance program, which stops drug dealers, child pornographers, and other possible criminals from opening accounts. Coinbase will also need to spend $50 million to improve its compliance program, which stops drug dealers, child pornographers, and other possible criminals from opening accounts.
- Coinbase will also need to spend $50 million to improve its compliance program, which stops drug dealers, child pornographers, and other possible criminals from opening accounts.
More developments on Coinbase fines here.
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