Key Takeaways
- Coinbase is halting all operations in Japan, citing “market conditions”
- Last week it lower 20% of its workforce, having already lower 18% final June
- Stock price is up practically 50% on the yr amid crypto rally, however is still 85% off its peak
- Problems are aplenty on the firm, whereas CEO Armstrong offered 2% of his stake in October
Coinbase has been in a world of ache lately.
Just final week, the alternate introduced it was shedding 20% of its workforce, having already lower 18% final June. I wrote a piece analysing what this meant for the corporate, which was buying and selling at a market cap under $10 billion, 90% down from the price at which it went public in April 2021.
This got here after CEO Brian Armstrong unloaded 2% of his stake in the corporate in October, after which I wrote a deep dive analysing what all of it meant for an organization that has been considered because the torch-bearer to hold crypto into mainstream circles as soon as and for all following its high-profile floating on the Nasdaq.
But immediately, extra dangerous information got here. The alternate announced it is halting all operations in Japan, citing “market conditions”.
Coinbase inventory price on the up
Despite the onslaught of dangerous information, Coinbase’s share price has been a giant winner in the early weeks of 2023, up 48% in simply 18 days.
This comes amid the biggest crypto rally in 9 months, which has seen prices surge throughout the board. While the bounceback in Coinbase’s share price is nice information for buyers, it additionally mockingly sums up precisely what the issue is – Coinbase’s correlation to the crypto market.
There are few issues extra risky than crypto, so it is not excellent news to be tied on the hip to its price motion. But Coinbase’s efficiency is depending on the crypto market as a result of because the price falls, transaction volumes and curiosity in the business, and by extension Coinbase, plummets.
During the pandemic, this was an important factor. The cash printer was on most energy, rates of interest had been low and retail buyers had been all aboard the FOMO practice, armed with a wholesome curiosity about crypto and a fats stimulus cheque.
But with the altering macro surroundings, the crypto business has freefallen from $3 trillion to $800 billion, earlier than this latest surge popped it again above $1 trillion.
Why are Japanese operations ceasing?
Despite the nice pump this previous few weeks, zooming out tells you that Coinbase has shed 85% of its worth since going public, gone via two rounds of layoffs, seen its CEO promote 2% of his inventory in October and now is ceasing operations in Japan.
All Japanese Coinbase prospects may have till February 16th to withdraw their holdings from the platform. If they fail to take action, the remaining belongings will likely be transformed to Japanese yen. Coinbase had labored laborious through the earlier crypto winter to increase into the Japanese market, so the abrupt departure is a disgrace.
But Coinbase is not the one alternate to make this transfer, with rival Kraken additionally asserting it was ceasing Japanese operations final month. Also like Coinbase, Kraken had lower a big chunk of its workforce, shedding 30% of staff after the FTX collapse shook the market. The plight of Coinbase’s excessive correlation with the crypto market is as soon as going through exchanges throughout the business.
Coinbase Q3 outcomes revealed that transaction quantity fell 44% from Q2. The fall in quantity and curiosity in the end is what has triggered the plummeting share price, layoffs, and now ceasing of Japanese operations, with a look at Google Trends all it is advisable see the dimensions of the dropoff in the general public’s consideration to the alternate.
For $COIN buyers, they’ll hope that the previous couple of weeks of softer macro information and a crypto bounceback are an omen of issues to come back, in any other case this share price rally will likely be short-lived.
