Digital Platform Coinbase Nears All-Time Low in Wake of FTX Collapse, Where to for COIN?

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    Meta Johnny

    Digital banking platform Coinbase has had quite the traumatic experience since it went public last year. Trading under the symbol $COIN, shares of Coi
    [See the full post at: Digital Platform Coinbase Nears All-Time Low in Wake of FTX Collapse, Where to for COIN?]


    Ihor Dusaniwsky @ihors3

    $COIN short interest is $1.26B
    27.35M shares shorted
    17.84 % SI% of Float
    15.14 % S3 SI% Float
    1.07 % fee

    Shares shorted up +663K shs, worth $30M, 2.48 %, over the last week.
    Shorts up +$1.71B in 2022 mark-to-market profits;
    including -$109M on today’s +8.07 % move.

    COIN 49.87 ▲ +3.88 (+8.45%) today




    The stench of FTX & SBF permeating deeper:

    Crypto lender Genesis had sought emergency loan of $1 billion from investors before it suspended withdrawals on its website- WSJ citing a confidential fundraising document.


    In an interview with Srivatsan Prakash, famous short seller Jim Chanos made the following comments (edited for clarity) about Coinbase Global (NASDAQ:COIN):

    “Coinbase is based here in the United States, which is a big help. The problem Coinbase has is that its model doesn’t work. There doesn’t have to be fraud for you to lose money as a Coinbase shareholder.

    I think the Coinbase depositor is probably in OK shape. But again, there’s no deposit insurance here, although it’s in the United States. If Coinbase does something that they shouldn’t, depositors and people who are holding coins on the exchange would be at risk. Again, I don’t think they’re doing anything they shouldn’t, and there’s no evidence they’re doing anything they shouldn’t.

    Their problem is simply that they have a high cost model in a market that is about to compress their commission rates. And that’s a different story. Coinbase is still charging retail customers 1.3% of assets per trade, and so that’s a round trip of 2.7%, which means that if you make four trades a year with Coinbase that’s 10% of your capital. That’s a big, big drag. And they are charging institutions a fraction of that rate. So it’s only going to be a matter of time before Fidelity and Vanguard and everybody else who offers crypto trading is going to completely undercut Coinbase for the same basic services. They are simply an executing broker. There’s no advantage to being there versus another well respected site. So that’s number one.

    Number two, the bull case morphed this summer into “Don’t worry about the losses, they are going to get into a bigger institutional deal with their Blackrock deal.” And that took the stock from $50 to $100. The problem with that deal is that the institutional business is tiny, because the commission rates are so much smaller. So the vast majority of Coinbase’s revenues are still coming from retail traders, not institutions. They don’t make any money on the institutional business, and probably never will. That was fallacy number one.

    The funnier pivot was when the bulls told me “OK, commission are probably going to be under pressure and costs are too high, but they’re going to stop paying their customers interest on cash balances.” Well OK, that’s fine, but how long can you get away with that, with not paying interest when everyone else — Schwab, Fidelity, Vanguard — are going to be paying clients interest on their cash balances? That’s just a fundamental, basic expectation by customers. So if you have to bolster your P&L by doing that, you’ve got a problem. So Coinbase has a business model problem. It just doesn’t work.”


    US Treasury Secretary Yellen:

    Yellen saying needs ‘adequate regulation’.
    “most activity in crypto has not been about financial innovation” and that there needs to be adequate customer protections.

    Crypto needs adequate regulation

    influential US senator Sherrod Brown called on the Treasury to develop crypto legislation.


    Oppenheimer maintains Outperform rating


    Coinbase Global (COIN 37.52, -0.75, -2.0%):

    Discloses that FY22 Adjusted EBITDA is expected to be within the negative $500 mln loss guardrail that the company provided in the shareholder letter; also announces further restructuring plan; will eliminate 950 jobs;


    Coinbase Global $COIN 64.90 USD▼ -12.24 (-15.87%) Receives a “Wells Notice” from the SEC stating recommending enforcement action alleging violations of federal securities laws;
    Downgraded to Perform from Outperform at Oppenheimer


    Crypto exchange Coinbase Global COIN –7.80% (COIN) fell 1.4% in premarket trading. The stock tumbled 7.8% in the previous session after the Commodity Futures Trading Commission sued crypto exchange operator Binance and its co-founder and Chief Executive Changpeng Zhao.


    SEC sues Coinbase for operating as an unregistered broker
    Following on from binance yesterday

    $COIN $47.83 -10.88 (-18.52%) Pre-Market
    After ▼ -5.84 (-9.05%) yesterday

    From the complaint:

    SEC says Coinbase has operated as an unregistered broker since at least 2019
    Crypto assets that Coinbase makes available put Coinbase’s operatings ‘squarely within the purview of the securities laws’
    Coinbase’s staking program includes five stakeable crypto assets, makign the staking program an investment contract and therefore a security
    Coinbase has never registered as a broker, evaidign the disclosure scheme for securities markets

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