Coinbase Stock Price: Will the FTX Fiasco Drag Shares of the Crypto Exchange Lower?
November 18 2022 - 6:16AM
Finscreener.org
Earlier this month, Coindesk
accessed a leaked balance sheet of Alameda Research which showed
$3.66 billion in unlocked FTT. Alameda Research is a trading firm
owned by Sam Bankman-Fried, who is also the CEO of FTX
- the second-largest crypto exchange
globally.
Alameda’s total assets on its
balance sheet stand at $14.6 billion, which includes the unlocked
FTT. Alameda also has $8 billion in liabilities, a majority of
which are loans, and $2.16 billion of these loans are
collateralized by FTT.
FTT is the token issued by the
FTX exchange, which allows users to benefit from a discount on
trading fees on the crypto platform. CoinDesk explains that Alameda has high exposure
to a token invented by a sister company and not an independent
asset such as a stablecoin or even a market-leading
cryptocurrency.
FTX files for bankruptcy
Once the details were made public
several investors, including Binance,
liquidated their FTT holdings due to the unusually close
association between FTX and Alameda Research.
In a Cointelegraph report, Mike
Burgersburg, an independent market analyst for the Dirty Bubble
Media Substack, states, “Alameda will never be able to cash in a
significant portion of FTT to pay back its debts.”
However, Alameda CEO Caroline
Ellison emphasized, “The balance sheet breaks out a few of our
biggest long positions we obviously have hedges that aren’t listed.
Given the tightening in the crypto credit space this year, we’ve
returned most of our loans by now.”
But, these statements did not
hold true, and FTX soon filed for bankruptcy. Additionally, over
$600 million has been hacked from FTX, wiping off billions of
dollars in wealth in less than ten days.
The lack of regulation
surrounding the crypto market continues to haunt investors and will
have a domino effect on other participants of this highly
disruptive space too. For example, shares of
Coinbase (NASDAQ:
COIN), now the
second-largest crypto exchange globally, have slumped by close to
25% in the past month. Will COIN stock price move lower by the end
of 2022?
What next for COIN stock price and
investors?
Coinbase went public in April
2021, and the
stock touched a record
high of $355 last
November. Currently, COIN stock is priced at $57, valuing the
company at a market cap of $15 billion.
Yes, selling pressure on Bitcoin
and other cryptos has intensified in the last two weeks. However,
the collapse of FTX will increase investor confidence in Coinbase,
which is regulated under the SEC.
Coinbase is the largest crypto
exchange in the United States and would be under pressure if the
previously announced merger between Binance and FTX had gone
through. As Binance and FTX have a large presence in international
markets, the expansion plans of Coinbase would also be dampened, at
least in the near term.
The stock price of Coinbase will
still be tied to the performance of Bitcoin and Ethereum, the two
largest cryptocurrencies in the world. It will crush the broader
markets in a bull run and grossly underperform when investor
sentiment turns bearish.
But Coinbase has successfully
diversified its revenue stream in 2022. Last year, 88% of total
sales originated from transaction fees. As trading volumes are
higher in bull runs, Coinbase managed to increase sales to $7.83
billion in 2021 from just $1.27 billion in 2020.
However, Coinbase also generated
$101.8 million from interest income in Q3, an increase of 1,100%
year over year. In the year-ago period, the company’s interest
income stood at $8.4 million. So, interest income accounted for 18%
of Coinbase sales in Q3 and is fast gaining momentum.
CoinbaseU+02019s leadership
position and its widening ecosystem make COIN stock a top long-term
bet, especially if you are bullish on crypto.
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