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Coinbase Stock Can Recover, but Competition Won’t Make It Easy

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Yellow Star

The cryptocurrency market has grown in 2021, nearly tripling in value and exceeding $2.2 trillion by the end of the year.

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Coinbase Global (COIN), a leading crypto brokerage, took advantage of the bull market and decided to go public in April last year.

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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.

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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.

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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.

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Coinbase generates most of its revenue from commissions on retail trading, which states that the stock has a high correlation to the crypto market.

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Yellow Star

The problem with COIN is not internal. The Fed's decision to hike interest rates to combat inflation has turned investors away from cryptocurrencies.

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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.

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However, the crypto bear market is not the only issue. Coinbase was forced to cut its fees on retail trading due to increased competition.

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Coinbase's Q1 report is unsatisfactory, if not worse. Coinbase wants to grow into a long-term game in the crypto market.

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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.

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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.

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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.

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Coinbase may become a booming business in a few years, but for now it is best to wait.

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