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Coinbase Stock Is the Lowest It’s Ever Been. Why? Coinbase stock has recorded a continuous all-time lowest value since it went public on the 14th of April. The company’s stock plunged from $328 per share on the listing day to $281 per share as of 20th of May. It seems to still be at a slumped level.
The cryptocurrency exchange company hit its investors with surprise on Monday evening with a convertible bond offering that left its stockholders with another series of inquiry. Crucially, more questions from investors indicates more uncertainty, and stakeholders never want to live with uncertainties. The firm has to struggle with falling shares as a result.
Here’s why Coinbase stock is the lowest it’s ever been.
Going Public Was Great But Has Been Roller Coaster Ride
It adopted direct listing in its efforts to go public. In essence, direct listing allows a company’s insiders to initiate direct sale of shares without having to adhere to the standard post-IPO lockup period which restricts the initial supply of shares.
There’s a notion that direct listing could have put immense pressure on the cryptocurrency exchange’s stock price. A similar trend was experienced in 2020 with tech companies like Palantir Technologies, a big data firm and Asana, a software maker. The two organizations experienced a plunge in their stock in their post LPO era.
In a statement, Edwaed Moya, a senior market analyst at Oanda indicated that it has to deal with competition, and a great deal of pessimism in the short term. This can create further issues over the long-term digital asset prices continue to decline.
The Rise of Other Cryptocurrencies
The firm’s slip only comes days after investors decided to put their money into extremely speculative cryptocurrencies like the Binance Coin and the meme, Dogecoin. The firm did not offer the more emerging digital assets and this may have hurt them over the short term.
The entity had indicated that most of its sales traffic is derived from bitcoin trades. However, the price of the bitcoin (the largest and most accepted crypto) has been rather flat and then declined over 30% recently.
Bitcoin Is Leading Other Assets To A Correction
Bitcoin (the world’s bellwether crypto) has experienced a 15% decline in value only a few days after it went public. Crucially, Coinbase’s revenues are extremely sensitive to crypto speculation.
In essence, the pricing strategies adopted by the market dictate the population of transacting users on the platform and the net value of the transactions made. It is obvious that Coinbase’s revenue base and profit margins will shrink if the bitcoin prices continue to trend lower.
There are concerns over the transaction fees charged by the firm for offering its services. In essence, the transaction fees account for the hugest portion (80%) of the crypto company’s revenue streams. There’s a tendency that the transaction fees will dwindle as competition emerges in the sector.
Currently, the exchange charges its customers a 0.5% fee for all transactions made on its platform and another fee (between 1.5% and 5%) depending on how the trade is funded.
Comparatively, its competitors like PayPal present their clients with commission-free investments on their app. Other rivals like Square also offer lower charges.