Coinbase stock (COIN): 2 bulls vs 2 bears

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YEREVAN (CoinChapter.com) – Coinbase, one of the largest crypto exchanges globally, saw its stock COIN slide 80% from its Nov. 9, 2021, peak of $369. As a result, the stock traded at $74 a share on Sep. 19, with no viable bias prediction.

Coinbase stock (COIN) traded 80% lower than its Nov 2021 peak.  Source: TradingView.com
Coinbase stock (COIN) traded 80% lower than its Nov 2021 peak. Source: TradingView.com

Instead, Coinbase exhibited both bullish and bearish arguments to back its case. Here are two of each.

Bullish cue #1: Growing user base

According to Coinbase, the company commands the trust of “approximately 103 million verified users, 14,500 institutions, and 245,000 ecosystem partners in over 100 countries.” The number of users has continued to grow since the company went public in Apr 2021. The data shows an over 100% growth since Mar 2021.

Coinbase users count over the years
Coinbase users count over the years

COIN makes its money from users trading crypto for a commission. In other words, the company makes revenue regardless of whether people buy or sell crypto. Thus, the more users, the better, and the Coinbase user base grew significantly.

Moreover, in Aug 2022, Coinbase announced an agreement to partner with Blackrock, the world’s largest asset manager, to bring crypto assets to institutional investments. Considering the magnitude of Blackrock’s influence, trading earnings from their institutional clients should dwarf those of retail investors that COIN currently caters to.

Bullish cue #2: Coinbase Regulatory control

One of the most controversial clauses in the Coinbase pro and with debate is its centralized nature and heavy regulatory control. While many experienced crypto enthusiasts consider regulations a disadvantage, institutional investors and ‘newbies’ tend to flock towards a more centralized and regulated space, as evidenced by their ever-growing number.

The scrutiny from the US Securities and Exchange Commission (SEC) damaged COIN initially. However, Serge d’Adesky, the President and Chief Financial Advisor of Northstar Strategic Investments, thinks that Coinbase could turn the scrutiny in its favor.

Adhering to regulations means hiring more lawyers and auditors to conform to those regulations. Bigger players, like Coinbase, Binance or FTX, can spread these costs over a wider user base. Smaller competitors, unable to do so, may be forced to close shop.

said the expert.

He also added that when “crypto goes mainstream,” Coinbase, and subsequently its COIN stock, will be one of the largest beneficiaries. Brian Armstong, the CEO of Coinbase, agreed with the bullish outlook.

Somehow, the more regulation for crypto, the better for Coinbase […] We are more than happy to engage with any regulators around the world who will take the time to meet with us. We don’t see that as a bad thing. On the contrary, we think it’s the best way to help the industry move forward.

commented the CEO.

Bearish cue #1: Dropping crypto prices hurt COIN

As mentioned, Coinbase gets revenue from transactions, so, in theory, the platform shouldn’t depend on crypto prices as long as people trade them. However, the reality does not support the claim. The charts clearly show COIN’s correlation with Bitcoin, and the stock could drop lower in the upcoming quarter.

The correlation between COIN price and Bitcoin (BTC).  Source: TradingView.com
The correlation between COIN price and Bitcoin (BTC). Source: TradingView.com

d’Adesky explained the paradox by drawing parallels between stocks and crypto investing.

Most investors, including a surprising number of institutional investors, have a difficult time shorting stocks or betting on their retractions. Rather than using short positions, bearish option plays, or futures markets, investors just move to the sidelines.

commented the expert.

He also pointed out that Betting on cryptos dropping in value is far more difficult. That’s why most investors don’t do it. “When cryptos are dropping, they prefer to take their shovels and pails out of that sandbox and go play elsewhere,” added d’Adesky.

Bearish cue #2: Unfavorable macroeconomic factors

As CoinChapter reported earlier, Annual inflation is forecasted to be 5.7% in 12 months, from July’s high of 6.2%, according to the US Central Bank’s most recent Survey of Consumer Expectations. If estimates are correct, the 5.7% number will put inflation at its lowest since October 2021. Lowering inflation is good news for the crypto and risk asset classes.

However, the geopolitical situation in the world continues to escalate. Russian President Vladimir Putin met with China’s leader, Xi Jinping, on Sep16 in Uzbekistan, where he vowed to press his attack on Ukraine despite Ukraine’s latest counteroffensive.

Meanwhile, the same day US President Joe Biden raised concerns that China might use the continuous war in Ukraine to justify an attack on Taiwan. He told 60 minutes that the US would send troops to defend Taiwan should China escalate the conflict further.

The Southern Caucasus is also uneasy, with Azerbaijan launching unlawful attacks along the Armenian border, shelling civilians.

While the said hotspots on the map don’t affect crypto directly, they destabilize the global economy. As a result, investors are less likely to take risks and put their money in a volatile asset. Thus, Coinbase (COIN) suffers by extension and could stay out of the limelight until the global geopolitical situation settles.

The post Coinbase stock (COIN): 2 bulls vs. 2 bears appeared first on CoinChapter.



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