After debuting on the markets and trading as high as $429.54, Coinbase (NASDAQ:COIN) is off sharply. The post-IPO blues are expected. The cryptocurrency exchange site’s problem is volatility.
Price volatility with cryptocurrency should drive trading volumes higher on Coinbase. Unfortunately, the company, once worth around $100 billion, cannot handle the transaction requests. Last week, the site crashed often. Every downtime will cost the company uncollected fees.
The stock valuations are unfavorable, too. Trading at over 30 times price-to-sales, Coinbase does not guarantee the same pace of growth over the next five years. Investors could buy crypto miners like Mara Digital (NASDAQ:MARA) or Riot Blockchain (NASDAQ:RIOT), too. RIOT has a short interest of around 18%. A short-squeeze is a positive catalyst for RIOT stock. By comparison, COIN stock is at the mercy of bitcoin’s price.
When Tesla’s (NASDAQ:TSLA) CEO, Elon Musk, derided bitcoin for its cost on the environment, the coin plunged. Other cryptos followed. The instability of the currency undermines Coinbases’s long-term prospects. The sharp correction in bitcoin is nothing new. At every turn downward, bitcoin rebounded. As a means of exchange, the volatility will undermine the legitimate use.
Investors should watch COIN stock for now. The stock’s upside depends on stability in the underlying cryptocurrency market.