Coinbase share meltdown continues as fresh concerns arise

[MongiIG]

The rapid drop in Bitcoin prices is taking its toll on shares of crypto exchange Coinbase, whose earnings added fuel to the fire this week as the company reported a drop in monthly users.

 

 

Daniela Sabin Hathorn | Presenter and Analyst, London | Publication date: Thursday 12 May 2022 

Bitcoin slump

The Bitcoin slump continues, with the coin now trading below the $30,000 level.

And, whilst many had hoped that the decentralised nature of Bitcoin would shield it from the effects of inflation and market slumps, recent years have actually proven that Bitcoin, alongside cryptocurrencies, are actually closely tied with market sentiment.

We only have to look at what happened through the pandemic, when we saw that big drop in Bitcoin prices alongside the stock market and then a rapid recovery in 2021.

Bitcoin is also thought to have been a safe haven in times of rapid rising rates when they diminish the value of investors’ money. But the volatile nature of the asset means investors are shying away from it too.

Bitcoin chart

This is the daily chart for Bitcoin. You can see it really dropping, intensifying that selloff, below that area, that lowest point that we'd seen back in June 2021, heading towards those 2020 lows. So, a lot of bearish sentiment coming into the market.

Not all clients can trade Bitcoin so a good way to get exposure to this is to trade crypto lenders and crypto trading platforms like Coinbase.

Coinbase chart

This is Coinbase's chart and not only were Coinbase's earnings bad this week, but the company also reported falling consumers and the drop in Bitcoin prices is really hindering its profits.

There are also concerns now about the risks involved with holding cryptocurrencies with them as there are reports that customers are perceived as unsecured creditors, which means they would not have access to their holdings if the company went bankrupt.

So, a lot of negative sentiment priced in here to Coinbase as well, as I was saying, from their earnings side, from their outlook, but also from this drop in Bitcoin prices. So, they move at parallel. They are tracking Bitcoin prices lower.

There doesn't seem to be an end in sight, at least not in the short-term. We do have technically this continuation here of the bearish reversal. No signs of bias coming in, buying the dip or attempting to push the price higher. As you can see, the RSI is still firmly to the downside.

So, it does look like Coinbase is going to continue to see all-time lows.