There seems to be an unending stream of bad news coming out of Coinbase Global (COIN 1.14%) these days. Not surprisingly, the downturn in the broader crypto market has been a downer for Coinbase as well — there have been layoffs, unprecedented doubt about Coinbase’s near-term prospects, and constant worries that the crypto market might never come back.
Against this backdrop, it might be tempting to throw in the towel and sell. However, there are actually three key reasons now might be the time to buy Coinbase, which is currently trading at about $62, more than 80% lower than its 52-week high of almost $369. As long as you still believe in the future of cryptocurrency, the long-term investment thesis for buying Coinbase remains in place.
Underlying fundamentals
First and most importantly, the underlying fundamentals for Coinbase look good. If you only listen to the drumbeat of bad news online, you might think the company is on the verge of some kind of liquidity or bankruptcy crisis. But check out its most recent forecast. What you’ll find is a company with a strong balance sheet and no exposure to the insolvencies now roiling the crypto industry. Even with a squeeze on fees from crypto trading and a loss of customers, Coinbase is still allowing customers to move their funds on- and off-platform as they choose.
Image source: Getty Images.
And, let’s not forget — Coinbase is still one of the leading cryptocurrency exchanges in the world by trading volume; this is a very strong competitive position to be in once the next crypto bull market kicks in. It’s also the only U.S. publicly traded cryptocurrency exchange, which gives investors tremendous transparency about what is actually happening. Unlike other crypto exchanges, where the dealings might be murky and opaque, you know exactly what you are getting with Coinbase.
Expansion opportunities
Moreover, the company is called Coinbase Global for a reason: Plans call for the exchange to expansion into markets around the world. Case in point: Coinbase recently received approval by regulators in Italy to offer cryptocurrency trading services. And in the past year, we’ve seen it expand into other European markets as well. So, even if trading volume in its core U.S. market might be drying up, there’s opportunity to make it up elsewhere.
And it’s not just geographic expansion that matters. There’s also expansion into adjacent markets, such as the one for non-fungible tokens. Granted, the rollout of the Coinbase NFT marketplace earlier this year has not gone as well as planned, primarily because NFT trading volume is down across the board. But there have been some big wins lately for Coinbase, including a splashy NFT collection from Hollywood legend Bill Murray.
Stealth Wall Street buying
Plus, it looks like institutional investors are quietly adding to their positions in Coinbase. In fact, four major institutions were adding to their positions, based on 13F filings from June 30. These include Ark Invest, whose Chief Executive Officer Cathie Wood — a longtime Coinbase supporter — has been reiterating her bullish investment thesis on the stock.
Remember, the standard Wall Street ploy is to convince everyday investors to buy high and sell low. This is the opposite of what you want to be doing. So when everyone else around you is dumping certain stocks, keep an eye out to see if any of the smart money appears to be buying. If so, this could signal that a stock is as beaten-down as it is going to be.
Buy signals for Coinbase
All in all, the case for buying the stock right now might be stronger than you think. You don’t need to be a bold contrarian to understand that the underlying fundamentals for Coinbase still look good. It also has a management team in place that appears to be building for the long haul, not just reacting haphazardly to news as it comes in.
So be patient and wait for Coinbase to release its next financial results on Aug. 9. Two weeks from now, you may have a very different view of Coinbase.
Dominic Basulto has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coinbase Global. The Motley Fool has a disclosure policy.