Coinbase Global (COIN) shares fell to their lowest level on record Monday as the consequences of FTX’s multibillion-dollar bankruptcy smashed cryptocurrency markets worldwide.
FTX, the bankrupt crypto exchange once run by Sam Bankman-Fried, owes its top 50 creditors more than $3 billion, according to court papers filed this weekend. The new administrator John J. Ray is planning to launch a “strategic review” to decide which projects of FTX can be salvaged or possibly sold and which can be restructured.
Because of the FTX disaster, Bitcoin prices fell 3.36% in early afternoon trade Monday to $15,706.40 per coin, bringing the six-month fall to approximately 46%. Moreover, any forced sale of FTX assets might result in a further drop in Bitcoin pricing, which has already dropped more than 72% from its peak in early November 2021.
Also, concerns over the destiny of stablecoins like Tether, which promises to support one-to-one U.S Dollar assets, as well as the stoppage of Genesis Global withdrawals, have increased investor fears of a prolonged market drop.
“FTX’s rapid bankruptcy is a catastrophic blow to the crypto industry and an overall negative for Coinbase,” said Christopher Brendler, an analyst at D.A. Davidson. “In the short term, we’re bracing for further FTX exposures, but we’re most concerned about possible long-term harm to investor appetite. Fortunately, Coinbase is not totally directly impacted and should benefit from the prospective stock’s growth and price strength later on,” Brendler added. He has a “buy” rating and a lowered price target on Coinbase stock at $70.
As for Coinbase Global itself, its shares fell 9.72% in afternoon trading on November 21 to $40.86 since the moment when it went public at $381 a share last April.
Earlier this month, Coinbase said total revenue for its fiscal third quarter fell 53% from a year ago to $576 million, leading to a larger-than-expected net loss of about $545 million.
Transaction revenues were estimated to be $366 million, despite a 27% fall in trading volumes. Still, the company believed that recent agreements with Google GOOLG and BlackRock BLK, plus many new products, would boost consumer engagement in the coming months.
“We remain cautiously hopeful that we will operate within the $500 million adjusted EBITDA loss guardrail that we announced for 2022,” Coinbase stated on November 3.
“However, we’re preparing with a conservative bias for 2023, expecting that the present macroeconomic challenges will stay and probably worsen,” the business noted.