The cryptocurrency market has grown in 2021, nearly tripling in value and exceeding $2.2 trillion by the end of the year.
Coinbase Global (COIN), a leading crypto brokerage, took advantage of the bull market and decided to go public in April last year.
The company's shares are down more than 85%. The primary reason behind the decline is less crypto-trading activity and a drop in cryptocurrency prices, which are beyond Coinbase's control.
Unfortunately, a steady decline in the share price does not present a positive outlook for investors. However, Coinbase could increase its profitability given its operational flexibility.
Therefore, whether Coinbase will weather the current downturn and the respect of investors remains a burning concern, making Coin a touch-and-go stock for now.
Coinbase generates most of its revenue from commissions on retail trading, which states that the stock has a high correlation to the crypto market.
The problem with COIN is not internal. The Fed's decision to hike interest rates to combat inflation has turned investors away from cryptocurrencies.
Back in 2021, when the crypto market was booming, Coinbase reported an annual profit of over $3.6 billion in revenue of over $7.8 billion.
However, the crypto bear market is not the only issue. Coinbase was forced to cut its fees on retail trading due to increased competition.
Coinbase's Q1 report is unsatisfactory, if not worse. Coinbase wants to grow into a long-term game in the crypto market.
Coinbase CEO Emily Choi highlighted that the decline in the company's bottom line is due to increased spending that will reward the company in the long run.
Coinbase's operating loss suggests that the company is at its all-time low. In addition, the lack of crypto trading and excessive competition posed significant threats to Coinbase.
However, given the size of the business and the power of the brand, the company may find ways to stay relevant and fight back more vigorously.
Coinbase may become a booming business in a few years, but for now it is best to wait.