Bitcoin’s Plunge Dragging Coinbase Down

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Coinbase's Shares Dropping

For the past few months, the crypto market has been in a serious plunge. Bitcoin has just dipped below $30,000 for the first time since January, dragging altcoins with it in the mud. The largest cryptocurrency in the world by market share is on a bad roll, yet experts say that investors shouldn’t be worried.

However, the most recent plunge did something that rarely happens. The top cryptocurrency trading firm Coinbase Global has experienced a major shares drop, falling about 2% early this week. Its current shares price is $217, down from a peak of $429.50 months ago.

It’s all because of Bitcoin’s plunge which was recently pushed by China’s crackdown on miners and investors and unfortunate comments by Tesla CEO Elon Musk.

Just 2 Months After Going Public

Coinbase was doing well for quite a long time before it went public a couple of months ago. The top trading firm went public via a direct listing of its stock, and the timing couldn’t be worse. Its current shares are down over 35% compared to the closing price on the first day of trading. In the same period, Bitcoin has experienced a 50% drop.

For a while, many Coinbase supporters argued that the trading platform is immune to Bitcoin’s price pendulum. Like many before them, they were simply not right. Regardless of the customers and the volume of transactions, crypto trading platforms are still dependent on the price of Bitcoin. When prices are down, they generate less revenue, and as a result, its shares experience a sharp drop too.

Over 90% of its revenue is driven from trading fees. These are assessed as a percentage of the transaction. The other services Coinbase offers such as custody are also based on percentage fees. Trading revenue is at its center, so it’s no wonder that Bitcoin’s price volatility affects it.

The good news is that the volatility can be a great opportunity for those brave enough to buy the dip. With the market in a serious plunge for a while now, maybe now’s the best time to invest in cryptos a bit. It’s a game of patience that requires buying low and selling high, or even higher if you can wait.

Of course, you need to be aware that it’s a highly volatile market with widespread influence on crypto trading firms as well.

Not the Only Crypto-Related Stock in Free Fall

While Coinbase’s case has been very public, other crypto-related stocks are falling as well. MicroStrategy, a software company which owns a lot of Bitcoin, fell down 11% this week. Marathon Digital Holdings, Riot Blockchain, and mining equipment company Canaan have all plummeted recently. Daily fluctuations are hitting the market hard, and it’s getting even harder for companies focused on selling mining equipment.

Fears of a crypto winter have been reignited recently, although experts are adamant that there’s no reason to offload cryptos in panic. Crypto is still a new asset and its price was always going to be volatile, so there’s no reason for concern at all for now.

June 23, 2021: • No Comments

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