Buy a Coinbase (COIN) stock to gain indirect exposure to Bitcoin (BTC) market has been a poor strategy so far compared to simply holding BTC.
In particular, COIN is down almost 50% to nearly $186, if measured from the opening rate at its IPO on April 14, 2021. By comparison, Bitcoin outperformed Coinbase stock by posting fewer losses. in the same period, a little more than 30%. as it fell from nearly $65,000 to around $41,700
What is bothering Coinbase?
However, the correlation between Coinbase and Bitcoin has been largely positive to date, suggesting that many investors view them as assets with similar value propositions. Namely mainly due to buzzing on how COIN could become a simpler onboarding experience for investors in the crypto sector compared to buying Bitcoin, Ether (ETH), and other digital assets.
But the COIN product is facing increasing competition with the arrival of cryptocurrency-based exchange-traded products (ETP), mining stocksand the like crypto-enabled companies listed on wall street indices. This may have reduced its demand as the go-to asset for gaining crypto exposure.
Related: Bitcoin Faces New โMilestoneโ In 2022 As New Forecast Predicts BTC Price โIn Millionsโ
Additionally, COIN faces downside risks due to its depressive forecasts for FY22. Coinbase stated in its latest earnings report that the volatility of cryptocurrencies could turn 2022 into an unprofitable year, noting that its adjusted EBITDA losses could reach around $500 million if its monthly trading users are at the low end of its guidance range.
Jere Ong, Principal Analyst and Founder of JR Research, indicated that 96% of Coinbase's total revenue in Q4 2021 came from fees charged for retail transactions, highlighting the "inherent weakness" of its business model. Extracts from his report:
โWe believe it offers a short-term buying opportunity for speculative investors. However, we do not encourage investors to hold COIN shares long-term unless they have very high conviction of its execution.
The risks of Bitcoin are completely different
Bitcoin is a different beast when compared to stocks from a centralized company like Coinbase.
absolute scarcitycensorship-resistant decentralized ledger and gold-like properties as potential hedge against inflation in the digital age are just some of the concepts that drive the price of BTC up today.
With inflation at 7.5% and actual inflation at 19.5% (shadowstats), the Fed is doing a great job! Just 100 times more, and they'll be at the Paul Volcker level of 30% interest rates! Have #bitcoin? pic.twitter.com/qesZ2iU0Mv
โ Davinci Jeremie (@Davincij15) March 17, 2022
As a result, analysts and strategists predict Bitcoin to get anywhere from zero to "millions" for 1 BTCdepending on who you ask.
Elsewhere, most exposed crypto stocks have also suffered the most compared to Bitcoin. Namely, mining companies listed on Nasdaq Canaanwhose stock value fell nearly 80% year over year, and riot block chainwhich fell 67.55% in the same period.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
Post navigation
Next Post
