Coinbase Shares Fall 9% Over the Month in Sync with Bitcoin’s Decline

The S&P 500 Equal Weight Index—an iteration of the standard index that treats all constituents uniformly regardless of their market capitalization—has realized a slight uptick of 0.27% during this month. This increment, although modest, accentuates the subpar performance of Coinbase relative to the broader market. Details can be explored through this link.

However, it is crucial to recognize the significant rebound underway at Coinbase. As the cryptocurrency sector has experienced a significant rally since year-end, Coinbase—the globe’s runner-up exchange—has been revitalized, with surging transaction fees largely fueling its recovery. In spite of recent price retractions, Coinbase’s stock has still soared upwards by over 40% since the beginning of the year, a figure that stands shoulder to shoulder with Bitcoin’s impressive ascent detailed here.

A dip in Coinbase’s stock is often indicative of the broader digital currency landscape, given the significant proportion of the company’s revenue attributed to trading fees. The initial quarter saw these fees constitute 67% of Coinbase’s total revenue. The contrast in trading volumes is telling, with Monday’s volume at $788.3 million, sharply down from the level on March 4, which was close to $3.2 billion, as revealed by TokenInsight.

As noted by Bloomberg Intelligence’s senior equity analyst Paul Gulberg, “Volume has retracted quite significantly, and the value has also receded from its first-quarter peak. Consequently, Coinbase is likely to register dwindled profitability for the second quarter,” according to a discussion with Fortune.

The Ebb and Flow of Digital Markets

In the preceding 30 days, leading cryptocurrencies such as Bitcoin, Ether, and Solana have plummeted roughly by 11%, 9%, and 18%, respectively, struggling to rebound since mid-March. A determinant factor has been the underperformance of the newly introduced 11 spot Bitcoin exchange-traded funds, sanctioned by the SEC in January. The funds’ value has oscillated, recording persistent net outflows since June 10, excluding a solitary day, amounting to approximately $1.3 billion, as per the CoinGlass data. This sequence of outflows represents an unprecedented stretch since the ETFs were launched.

Coinbase’s fate is intertwined with these shifts because it’s not only tied to Bitcoin values but also acts as the custodian for eight out of the 11 ETFs, receiving a custodial fee of 0.2%. Outflows subsequently mean a decrement in Bitcoin holdings and, thereby, reduced income.

In the grand scheme, Coinbase is in possession of more than $207 million in Bitcoin, ranking it as the sixth-largest public corporate holder. Additionally, since June 12, shares in MicroStrategy—the top Bitcoin holding company—have witnessed an 8% declivity.

Gulberg views sentiment as the predominate force behind the recent sell-off in Coinbase shares, considering the substantial number of the company’s shares owned by individual investors. He elaborates, “When there’s a significant buzz and movement in the digital asset sphere, individuals flock to Bitcoin and Coinbase alike. Conversely, when enthusiasm wanes, these investors quickly exit from Coinbase assets.”