Even with gains through midday Tuesday of more than 4%, to nearly $222, shares of cryptocurrency exchange Coinbase are down about 13% since June 12, when they closed around $255. During that same span, Bitcoin prices have fallen about 9% to around $62,000.
The equally weighted S&P 500 – the version of the index that makes no distinction between companies’ market capitalization – has risen a modest 0.27% this month, but it still highlights how the stock market is underperforming the market in general.
But it’s also important to note that Coinbase is still in the midst of a major comeback. The cryptocurrency market has rebounded tremendously since late last year, and Coinbase, the world’s second-largest exchange, has enjoyed a renaissance of sorts thanks to rising trading revenue. Despite the recent drop in share price, Coinbase shares have soared so far this year alongside Bitcoin – up more than 40%, with the original cryptocurrency seeing similar gains.
When Coinbase stock falls, it is often a reflection of the digital asset to a large extent, given that much of the company’s revenue comes from trading fees. In the first quarter of the year, transactions represented 67% of revenue. On Monday, the trading volume was $788.3 million, while on March 4 it was almost $3.2 billion.
“Volume has retreated quite a bit and the price has recovered a bit from the first quarter peak. So (Coinbase) will see lower profitability in the second quarter,” said Paul Gulberg, senior equity analyst at Bloomberg Intelligence. Fortune.
‘Lots of noise and activity’
Over the past 30 days, Bitcoin, Ether, and Solana are down approximately 11%, 9%, and 18%, respectively, and none of them have managed to gain momentum since mid-March. A key reason is the slow performance of the 11 Bitcoin exchange-traded funds, which the SEC approved in January. Since then, the price of the underlying asset, Bitcoin, has fluctuated with the large sums flowing in and out of the products. The latest series of net outflows from ETFs began on June 10 and has continued every day except one, totaling about $1.3 billion, according to data from CoinGlass. It is the longest stretch of departures since the products debuted.
Capital outflows not only affect Coinbase due to its ties to Bitcoin, but the company is custodian of eight of the 11 ETFs, for which it receives a 0.2% fee. Exits mean they hold less Bitcoin, so they generate less income.
Additionally, Coinbase owns more than $207 million worth of Bitcoin, making it the sixth most exposed public company. Shares of MicroStrategy, the company that holds the most Bitcoin, are down about 8% since June 12.
However, Gulberg believes that the most important factor in Coinbase’s recent stock decline is “sentiment,” since many of the company’s shares are held by retail traders: “When there is a lot of noise and activity in the digital asset space, people are rushing towards Bitcoin.” and Coinbase. And vice versa: when feelings die and slow down, people run away from Coinbase.”