Is Coinbase Stock A Good Buy Now?

What Is Coinbase?

Coinbase is the largest cryptocurrency exchange within the United States. Bitcoin and Ethereum are among 50 digital currencies accepted by the platform. Year-to-date, the price of bitcoin has increased by more than 25%, but its price experienced massive plunge today, nearly touching the $30K price level. Nonetheless, bitcoin still holds the highest market capitalization of any virtual currency. Ethereum, the second largest coin by market cap, saw it’s price crushed nearly 40% earlier today. However, it is still up 268% YTD.

PARIS, FRANCE – APRIL 13: In this photo illustration, a visual representation of the digital … [+] cryptocurrency Bitcoin is displayed in front of the Coinbase cryptocurrency exchange platform logo on April 14, 2021 in Paris, France. Coinbase, America’s leading cryptocurrency exchange, arrives on Wall Street on Wednesday April 14 as part of a ‘direct introduction’. An IPO, eagerly awaited by crypto enthusiasts, which could value the Californian company at more than 100 billion dollars. This is the most anticipated event on Wall Street since Facebook came public: the Coinbase platform, specializing in cryptocurrencies, entered the Nasdaq at a price of $ 250 per share. It’s the biggest introduction for an American business since Uber in 2019.Taking advantage of exploding demand for digital currencies, Coinbase said last week that it expects to make a profit of $730 million to $800 million in the first quarter of 2021, more than double the total profit in 2020. Revenues for the first three months of 2021 have likely exceeded last year’s, to nearly $1.8 billion. (Photo illustration by Chesnot/Getty Images)

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Coinbase levies fees for trading and depositing funds. These fees are the primary source of revenue for the company. In 2020, transaction fees from trading and storage services accounted for approximately 90% of the company’s revenue.

Why Is Coinbase Stock Price Falling?

Coinbase (NASADQ: COIN) stock price is closely correlated to Bitcoin’s price. Yesterday, the stock declined by nearly 4%, and today it dropped over 7%. Coinbase stock made an all-time time low of $208 per share today. The company’s stock is currently trading well below its IPO’s benchmark price of $250. Since April, the price has dropped by nearly 33%.

The company’s stock price took a major nose dive after it announced plans to sell convertible bonds to raise $1.3 billion in capital. This sparked panic among investors who were concerned about their shares being diluted.

The company went public in April via a direct listing, which does not require it to raise capital or issue shares, indicating that it is self-sufficient and does not require additional funds to sustain itself. However, the announcement now portrays the company in a different light.

Coinbase’s stock price’s collapse has been exacerbated by the general bearishness in the cryptocurrency market.

Why is Bitcoin Falling?

Regulators in China have made it more difficult for businesses to provide cryptocurrency-related services. They have stated that digital currencies should not be accepted for commercial transactions. This particular headline spurred the massive sell off in the bitcoin price today.

Elon Musk declared that, due to environmental considerations, Tesla

TSLA
will not accept bitcoin as a form of payment for its electric automobiles. Tesla had invested $1.5 billion into the controversial cryptocurrency before selling most of it. As a result, investors were prompted to sell their crypto assets.

Is Cathie Wood Still Buying Coinbase?

Cathie Wood, the CEO of Ark Invest, has made a name for herself in the financial industry. Her “Innovation Fund” has earned approximately 45% per year over the last five years. The assets of the fund are now worth more than $50 billion.

Ark Invest is fully capitalizing on Coinbase’s stock price decline by increasing its exposure to 624 million shares, accounting for 3% of the company’s holdings and nearly 10% of Coinbase’s total shareholding.

Should I Buy Coinbase?

Overall, the sentiment related to cryptocurrencies is positive with people more aware of what they are and how they operate, leading to improving acceptance. Coinbase has played a major role in making these digital currencies accessible to the general public. Because its price is closely linked to that of Bitcoin, the company is likely to recover eventually, and once the selling frenzy subsides, investors may see the stock price rise.