It seems to be official: cryptocurrency exchange Coinbase has seen a strong rebound in its share price as digital asset trading activity continues to pick up speed. In addition, COIN has outperformed the likes of Tesla and Amazon, among others.
The news is also confirmed by Blockworks‘ official Twitter account, which reads:
COIN has easily outperformed the likes of TSLA, AMZN, AAPL, MSFT and META year to date.
But now we're in earnings season… will it last?@Sebsinclair1989 reports https://t.co/KuXZee7e4n
— Blockworks (@Blockworks_) January 25, 2023
Coinbase’s situation: COIN on the rise compared to Tesla and Amazon
As anticipated, the Coinbase stock has outperformed both the broader tech sector and the benchmark digital asset Bitcoin this year. Moreover, COIN is now up about 60% since the beginning of 2023, with a market capitalization of about $12.2 billion.
The US-traded cryptocurrency exchange was changing hands at about $56 per share until Tuesday’s closing bell in New York.
Likewise, US tech heavyweights benefited this month from long-awaited macro favorable winds that slowed, if not reversed, the 2022 carnage between digital and traditional assets.
However, not to the level of Coinbase. A major dollar-weighted technology stock index, traded on the New York Stock Exchange under the ticker NYFang, has meanwhile posted gains of 16% since the beginning of the year, leaving the index 44% behind Coinbase’s 60% over the same period.
Not to mention that the NASDAQ-100 Technology Sector Index, a collection of equally weighted technology stocks, has also posted smaller gains: about 11%. The former index replicates the performance of some of the largest US technology stocks, including Meta Apple, Amazon, Netflix, and Google.
Its performance marked a significant rebound from last year’s decline, but still much weaker than Coinbase.
COIN fell slightly in after-hours trading Tuesday, dropping to $52.48, good for a -1.8% decline, data show.
However, the exchange’s shares are up more than 23% against the price of Bitcoin, which has risen 37% since the start of the year.
Crypto’s blue-chip equity closed above a previous daily high near $50 last week, its highest point in over forty days. Thus, a welcome breather for the exchange, which has taken hits from the broader sell-off in the sector.
Which, as we recall, dragged down dozens of its exchange-listed digital asset peers last year, including cryptocurrency miners. Indeed, the collapse of stocks such as Genesis, Three Arrows Capital, FTX, and Voyager has exacerbated selling pressure throughout 2022.
Concerns about the future of the exchange and particularly its correlation with digital assets under shock included. At that point, even market participants had become cautious about trusting centralized entities with their funds.
Coinbase’s situation and the words of the exchange’s CEO
In any case, speculation about the exchange and its stock peaked in mid-December, as it continued to record consecutive daily declines before reaching an all-time low of $31.55 by 6 January.
After a jump on 9 January, which more or less coincided with several Bitcoin price spikes, the exchange’s sentiment was bolstered by its agreement with New York state regulators.
In this regard, Coinbase CEO Brian Armstrong promised shareholders in August that he would diversify his company’s revenue away from its reliance on trading fees.
Notably, at the time on CNBC, Armstrong responded to some questions about the macroeconomic outlook and financial conditions of the exchange, stating:
“It’s never as good as it seems, it’s never as bad as it seems. We try not to focus on short-term highs and lows, we just pull back.”
Coinbase’s $100 million settlement with New York regulators
In early January, as anticipated, Coinbase shares rose 7% after news broke that the exchange agreed to a $100 million settlement with New York regulators in response to AML/Compliance violations.
In fact, the New York State Department of Financial Services had found that Coinbase had violated anti-money laundering laws by allowing customers to open accounts without full background checks, resulting in a $50 million fine.
The exchange is also required to invest another $50 million over two years to address serious deficiencies in its compliance practices, the court filing had said. However, trouble for Coinbase does not end there.
In fact, since its public market debut in 2021, Coinbase has faced a series of regulatory hurdles, causing shares to plummet by more than 90%. In September 2021, the US Securities and Exchange Commission had effectively shut down Coinbase’s lending program, Coinbase Lend, declaring such products unregistered security offerings.
Still, in July 2022, COIN plummeted 14% after the SEC classified nine tokens listed on Coinbase as securities in a civil complaint. The agency subsequently subpoenaed the exchange to investigate how it classifies the tokens.
So, as the exchange continues to battle regulators over how cryptocurrencies are classified, executives have doubled down on promises that Coinbase will strive to diversify its revenue streams and thrive.
Again the exchange’s CEO, in this regard had stated:
“One thing we’re doing is shifting more of our revenue over time, from trading fees to what we call subscriptions and services. Such services have grown to around 18% of the exchange’s total revenue.”