Should We be Worried about Coinbase?

By Decentralized Bank | The Bank | 11 May 2022


Coinbase

Coinbase's stock, COIN, took a huge hit today. It tumbled more than 25%. What hurts more is that it has been dropping significantly for a while. Steady freefall has COIN settling around $53 from last years high of around $350. Is there any coming back from this?

In the short-term, I don't think so. There are plenty who disagree with me. Cathie Woods' Ark Invest snatched up shares several days ago. COIN is also a staple in portfolios that desire crypto stocks as opposed to owning actual cryptocurrencies (several crypto ETFs are also a common option). Coinbase is still operating and has many users. It is the most well-known exchange and its convenience is often a selling point and initiation into crypto.Β 

Having said this, I won't be buying COIN on the dip. Goldman Sacks seem to be pulling their support for the stock. They lowered COIN's rating to Neutral from Buy. COIN's target priced has been demolished, from $240 to $80. While COIN can come back, it would take more than just a relief rally in the crypto market. In other words, just because the crypto market returns that does not necessarily mean COIN will be back.Β 

On a aside note, it has been revealed that if Coinbase were to declare bankruptcy, the funds of Coinbase users could be taken in the bankrupcy proceedings. I have no idea if bankruptcy is on the table but given Ark Invest's recent purchase, I'm guessing not.Β To be upfront, this does not impact me personally too much, since I only have several coins from their free learn/earn program. A transfer to another exchange can easily be done. However, the network fee based on network usage is extremely high right now. Whether paying the high fee is worth it for you is a personal decision. The fee is not worth it to me, so I'm keeping what I have with Coinbase fo now.

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