Key Takeaways
Coinbase is halting all operations in Japan, citing “market circumstances”
Final week it reduce 20% of its workforce, having already reduce 18% final June
Inventory worth is up practically 50% on the yr amid crypto rally, however remains 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 alternate introduced it was shedding 20% of its workforce, having already reduce 18% final June. I wrote a chunk analysing what this meant for the corporate, which was buying and selling at a market cap under $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 an organization 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 right now, extra unhealthy information got here. The alternate introduced it’s halting all operations in Japan, citing “market circumstances”.
Coinbase inventory worth on the up
Regardless of the onslaught of unhealthy information, Coinbase’s share worth has been a giant winner within the early weeks of 2023, up 48% in simply 18 days.
This comes amid the largest crypto rally in 9 months, which has seen costs surge throughout the board. Whereas the bounceback in Coinbase’s share worth is nice information for traders, it additionally satirically sums up precisely what the issue is – Coinbase’s correlation to the crypto market.
There are few issues extra risky than crypto, so it’s not excellent news to be tied on the hip to its worth motion. However Coinbase’s efficiency relies on the crypto market as a result of as the worth falls, transaction volumes and curiosity within the business, and by extension Coinbase, plummets.
Through the pandemic, this was a fantastic factor. The cash printer was on most energy, rates of interest had been low and retail traders had been all aboard the FOMO prepare, armed with a wholesome curiosity about crypto and a fats stimulus cheque.
However with the altering macro atmosphere, the crypto business has freefallen from $3 trillion to $800 billion, earlier than this current 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 by way of 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 can have till February sixteenth to withdraw their holdings from the platform. In the event that they fail to take action, the remaining property can be transformed to Japanese yen. Coinbase had labored exhausting throughout the earlier crypto winter to increase into the Japanese market, so the abrupt departure is a disgrace.
However Coinbase is just not the one alternate to make this transfer, with rival Kraken additionally saying it was ceasing Japanese operations final month. Additionally like Coinbase, Kraken had reduce a big chunk of its workforce, shedding 30% of staff after the FTX collapse shook the market. The plight of Coinbase’s excessive correlation with the crypto market is as soon as going through exchanges throughout the business.
Coinbase Q3 outcomes revealed that transaction quantity fell 44% from Q2. The autumn in quantity and curiosity in the end is what has precipitated the plummeting share worth, layoffs, and now ceasing of Japanese operations, with a look at Google Tendencies all you have to see the dimensions of the dropoff within the public’s consideration to the alternate.
For $COIN traders, they’ll hope that the previous couple of weeks of softer macro information and a crypto bounceback are an omen of issues to return, in any other case this share worth rally can be short-lived.
