• Analyst Dan Dolev from Mizuho predicts that Coinbase’s stock could drop 40% from its current price due to a survey suggesting that retail traders are not participating much in the recent surge in Bitcoin’s price.
• Dolev’s note on the Coinbase stock reads that the exchange’s market share during the bitcoin rally was 5.3%, which is in line with pre-rally levels.
• Dolev also states that Coinbase’s decision to end operations in Japan and potential signs of take rate pressures in Q4 may mean more headwinds for 2023 revenue.
Coinbase Global Inc, a cryptocurrency exchange, is likely to give up its entire year-to-date gain in the coming weeks and months, according to Dan Dolev, a senior analyst at Mizuho. This week, Dolev reiterated his „underperform“ rating on the cryptocurrency exchange and announced a $30 price objective that represents an alarming 40% downside from here. His warning is based primarily on a new survey that suggested retail traders are not participating much despite the recent surge in Bitcoin’s price.
Retail trading is Coinbase’s bread and butter, as it accounted for 83% of revenue in 2021. According to the survey, roughly 90% of the traders that were on the sidelines in December continue to be inactive this month. On top of that, over 33% that traded last month are sitting it out in January. This lack of retail participation is what Dolev believes will lead to a drop in Coinbase’s stock price.
Dolev’s bearish note on the Coinbase stock reads: „We measured COIN’s volumes against those of 25 largest crypto exchanges. We found that COIN’s share of combined volumes during the rally (bitcoin) was 5.3%, about in line with levels prior to the rally. Expectations for a stronger market share gain after Coinbase’s IPO have not materialized.“ This means that Coinbase’s IPO was not as profitable as expected and may indicate a larger problem with the company’s operations.
On top of the survey results, Dolev believes that Coinbase’s decision to end operations in Japan and potential signs of take rate pressures in Q4 may mean more headwinds for 2023 revenue. This suggests that Coinbase’s financials could be further weakened in the near future, leading to a decrease in its stock price.
Overall, Dolev’s warning that Coinbase’s stock could drop 40% from its current price should be taken seriously. The survey results and potential signs of take rate pressures indicate that Coinbase’s financials could be further weakened in the near future, leading to a decrease in its stock price. Investors should monitor the situation closely and consider reducing their holdings in the company.