Analysts at Goldman Sachs have downgraded Coinbase Global Inc. (COIN) shares after falling cryptocurrency prices damaged the exchange’s core operations, highlighting the problems faced by the bear market.
The reason for the downgrade is the continuing decline in crypto values. Coinbase will need to significantly reduce its cost base to halt the consequent cash outflow when retail trading activity dries up.
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Bloomberg reports that there are still 20 buy recommendations, six hold ratings, and five sell ratings for Coinbase as of June 27. Hold-rated stocks expectedly perform similarly to the market, while sell recommendations are instructions to liquidate an asset.
Coinbase’s shares have plummeted over the last seven months. Source: TradingView.
In April 2021, Coinbase started trading on the Nasdaq and immediately surpassed its pre-listing price, finally hitting $381. At such prices, the total market capitalisation of COIN was close to $100 billion. However, COIN’s share price has decreased by 84% since November to less than $58 a share. The shares fell 8% on Monday, lowering its market capitalisation below $15 billion.
Coinbase shares have been sold off with falling cryptocurrency prices. Since reaching a high of over $69,000 in November 2021, Bitcoin (BTC) has declined by almost 70%.
Besides its plummeting stock price, Coinbase has been forced to lay off around one-fifth of its workforce and has even withdrawn employment offers. The prospect of a recession may prolong the so-called “crypto winter” and lead to a protracted period of unfavourable market circumstances.
Credit rating agency Moody’s has lowered Coinbase’s Corporate Family Rating from Ba2 to Ba3. According to Moody, Coinbase’s income model is dependent on trading volumes, which have plummeted over the last several months amid the mass exodus of retail traders.