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Coinbase stock remains below a key support level, and several risks suggest that it may extend its downward trend. The shares have fallen to $130, down about 50% from their highest point this year and 70% below last year’s peak. The decline could continue in the near term as crypto prices drop, the USDC supply slips below $70 billion, and ETF outflows rise.
Coinbase Stock at Risk as Crypto Prices Drop
The biggest risk facing Coinbase is the ongoing retreat of Bitcoin and most altcoins. Solana dropped to $83, down by 33% from its highest point in September. Bitcoin, on the other hand, dropped to $73,235, down sharply from the October high of $87,400. The market capitalization of all coins has dropped from close to $3 trillion in October to $2.4 trillion today.
Coinbase and other crypto exchanges tend to underperform when Bitcoin and other cryptocurrencies fall. Lower prices typically reduce trading activity, which in turn lowers transaction revenue. The company’s most recent earnings report showed that transaction revenue dropped to $450 million last quarter from more than $1.04 billion in the same period a year earlier.
Coinbase is working to offset this volatility by expanding to other industries. It has a goal of becoming an exchange for everything, allowing investors to trade assets like stocks, ETFs, and commodities. Also, it has launched more services, including predictions and on-chain lending. The challenge, however, is that these services will take time to overtake transactions.
USDC Market Cap is Falling
Coinbase has become a large distributor of USD Coin, the second-biggest stablecoin in the world. In its last results, the company generated over $307 million in stablecoin revenue, with the bulk of this coming from USDC. The average USDC held in Coinbase products jumped to a record high during the month.
The challenge, however, is that the amount of USDC in circulation has continued falling this year. CoinMarketCap data shows that the valuation has dropped to $69 billion from the year-to-date high of $80 billion.
It is unclear how much USDC is held in Coinbase products. However, since the USDC supply has dropped, there is a likelihood that those in its ecosystem have also dropped.
If this happens, it means that the interest the company earns on all the USDC it holds will also continue falling.
Crypto ETF Outflows are Rising
Further, data shows that investors are selling their cryptocurrency ETFs. Spot Bitcoin ETFs have lost over $1.88 billion this month after losing $515 million last month. Ethereum funds have lost $695 million this month after losing $1.6 billion last month.
Other spot altcoin ETFs have shed assets in the past few months. This is important because Coinbase is the biggest custodian of crypto ETFs, meaning that the outflows will have an impact on its business.
Coinbase Stock Price Technical Analysis
Technicals also suggest that Coinbase is at risk of further downside. It has already dropped below the important support level of $140, the lowest swing in June and August.
Coinbase has also remained below all moving averages and is slowly forming a bearish flag pattern. This pattern is made up of a vertical line and a horizontal channel. In most cases, this pattern normally leads to more downside.
Therefore, if these fundamental risks persist, Coinbase shares may continue to fall, potentially to the psychological level of $100. On the other hand, a move above the key resistance level of $150 will invalidate the bearish outlook and point to more downside.
This article provides financial market analysis, not investment advice. Stock prices and cryptocurrency markets carry substantial risks. Technical scenarios and revenue projections do not guarantee future results.
