Jim Chanos, founder and president of Kynikos Associates, called Coinbase a “bubble stock” during a CNBC interview on Friday.
Last year, Coinbase became the first crypto exchange to list its stock (COIN) with much fanfare and fanfare. But less than a year later, the stock’s value has fallen by nearly 50 percent. At one point, its share price was as high as $400, a run that coincided with a time when the price of bitcoin was also hitting its ATH of around $69,000.
Although the values of both assets are now far away from their ATH, a cursory look at the available data shows that investors who invested directly in bitcoin suffered less losses than those who invested in Coinbase stock.
“So Coinbase is the one I’m talking about. Coinbase is what we would call one of the bubble stocks. Obviously, it’s got a unique market place, being the only public crypto exchange to go along with it as a result.” There’s an evaluation for that,” Chanos said during the interview.
He continued in his belief that Coinbase “probably won’t be profitable this year with a $40 billion market cap.”
Factors Affecting Coinbase Stock
Speaking about the poor performance of the coin, Chanos said that increased competition among crypto exchanges means that there will be “fee compression” and since the exchange is dependent on these fees for its revenue, it would be less likely if they were affected. loses a lot. ,
He continued that despite Coinbase’s best efforts to expand its business to other ventures, these activities may not have the desired effect on its stock performance.
He also pointed out the difference between the price of the coin and bitcoin. Before now, there was a positive correlation between the value of stocks and BTC, leading some investors to see them as equal value propositions. However, it appears that is no longer the case.
The emergence of more crypto-linked exchange-traded products and mining stocks has fueled the demand for Coinbase stock.
Furthermore, Coinbase faces more problems due to the general crypto industry outlook for the year. Many analysts predict that the value of bitcoin and other digital assets will continue to trade in a range, and with ongoing political tensions around the world, investors may not be attracted to crypto investments.
For Coinbase, this would mean fewer transactions that would affect its profitability.
Speaking on the above, Jare Ong, principal analyst at JR Research, said that 96% of exchange revenue in the fourth quarter of last year came through fees levied on retail transactions.
He believes this reflects the weakness of Coinbase’s trading and, thus, advises investors to hold exchange stocks only for the “short term”.
What did you think of this topic? Write to us and let us know!