Coinbase: A Crypto Sell-Off Only Adds To The Reasons To Avoid The Stock
Vincent Martin | Jun 15, 2022 08:57
At the moment, there are over 700 stocks trading on US exchanges with a market capitalization over $10 billion. Not one of those stocks has had a worse 2022 than Coinbase Global (NASDAQ:COIN), which has declined a stunning 79.6%.
Coinbase's position at the top (or bottom, as it were) of the list perhaps isn't that surprising. Cryptocurrencies have had a brutal 2022. Bitcoin (BTC/USD) and Ethereum (ETH/USD) have been more than halved year-to-date.
Terra (LUNA/USD) priced as low as 60, with a yield over 10%—a yield that suggests the bond market is pricing in a material chance that Coinbase actually goes bankrupt at some point over the next decade.
To be sure, that scenario seems unlikely. Coinbase will cut costs, crypto likely (though not definitely) will bounce back to some extent, and the company can get back toward profitability.
But a $12 billion market cap isn't justified by avoiding bankruptcy. It's justified by creating consistent, substantial, free cash flow. Coinbase isn't going to do that any time soon. Until there's clarity on when it will, COIN absolutely can keep falling.
Disclaimer: As of this writing, Vince Martin has no positions in any securities mentioned.
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