Key Takeaways
- Coinbase is halting all operations in Japan, citing “market situations”
- Final week it lower 20% of its workforce, having already lower 18% final June
- Inventory value is up almost 50% on the yr amid crypto rally, however continues to be 85% off its peak
- Issues are aplenty on the firm, whereas CEO Armstrong bought 2% of his stake in October
Coinbase has been in a world of ache not too long ago.
Simply final week, the trade 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 beneath $10 billion, 90% down from the worth at which it went public in April 2021.
This got here after CEO Brian Armstrong unloaded 2% of his stake within the firm in October, after which I wrote a deep dive analysing what all of it meant for a corporation that has been seen because the torch-bearer to hold crypto into mainstream circles as soon as and for all following its high-profile floating on the Nasdaq.
However in the present day, extra dangerous information got here. The trade announced it’s halting all operations in Japan, citing “market situations”.
Coinbase inventory value on the up
Regardless of the onslaught of dangerous information, Coinbase’s share value has been an enormous winner within 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. Whereas the bounceback in Coinbase’s share value is nice information for buyers, it additionally sarcastically sums up precisely what the issue is – Coinbase’s correlation to the crypto market.
There are few issues extra risky than crypto, so it isn’t excellent news to be tied on the hip to its value motion. However Coinbase’s efficiency depends on the crypto market as a result of as the worth falls, transaction volumes and curiosity within the trade, and by extension Coinbase, plummets.
In the course of the pandemic, this was an amazing factor. The cash printer was on most energy, rates of interest have been low and retail buyers have been all aboard the FOMO practice, armed with a wholesome curiosity about crypto and a fats stimulus cheque.
However with the altering macro setting, the crypto trade has freefallen from $3 trillion to $800 billion, earlier than this latest surge popped it again above $1 trillion.
Why are Japanese operations ceasing?
Regardless of 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’s ceasing operations in Japan.
All Japanese Coinbase clients may have till February 16th to withdraw their holdings from the platform. In the event that they fail to take action, the remaining belongings can be transformed to Japanese yen. Coinbase had labored onerous through the earlier crypto winter to develop into the Japanese market, so the abrupt departure is a disgrace.
However Coinbase just isn’t the one trade to make this transfer, with rival Kraken additionally saying it was ceasing Japanese operations final month. Additionally like Coinbase, Kraken had lower a big chunk of its workforce, shedding 30% of workers after the FTX collapse shook the market. The plight of Coinbase’s excessive correlation with the crypto market is as soon as dealing with exchanges throughout the trade.
Coinbase Q3 outcomes revealed that transaction quantity fell 44% from Q2. The autumn in quantity and curiosity finally is what has induced the plummeting share value, layoffs, and now ceasing of Japanese operations, with a look at Google Traits all that you must see the dimensions of the dropoff within the public’s consideration to the trade.
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 value rally can be short-lived.