Cryptocurrencies may be the most talked about asset class of the last decade. Cryptocurrencies began largely as an academic debate as alternatives to traditional currencies began to take shape. However, over the past few years, the rise of retail investors has catalyzed a growing interest in cryptocurrency tokens. Whether it’s digital art such as non-fungible tokens (NFTs), Bitcoin (a bit -2.97%) again ethereum (ETH 0.15%)or meme coins pumped out by prominent public figures, cryptocurrencies have begun to peak.
One of the most notable companies in the crypto industry are exchanges. coin base (coin -2.70%)The company’s share price has been volatile over the past few years, which is not entirely surprising given the waning enthusiasm for cryptocurrencies during these uncertain economic times.
One silver lining could be after the collapse of some competitors. FTX, the coinbase is still standing. And Wall Street is buying.
A modern tale of cryptography
When cryptocurrencies started gaining momentum and becoming part of the modern vocabulary, casual investors almost always referred to Bitcoin. One of the biggest reasons Bitcoin seemed so appealing was not only because it was the first cryptocurrency, but because it is finite. Unlike traditional fiat currencies like dollar bills, Bitcoin cannot be printed on demand. As such, Bitcoin has been dubbed “digital gold” by everyone from social media influencers to hedge fund managers.
Not long after Bitcoin’s rise in popularity, software programmers and technology visionaries jumped on the bandwagon, arguing that new tokens would be created with a variety of use cases and utilities. Perhaps at the height of the COVID-19 pandemic, companies of all sizes will publish (or mint, in virtual currency terms) virtual assets such as paintings, music recordings, and sell rights to these digitized things. There must have been an enthusiastic voice when it started. Goods in the form of NFT.
Unsurprisingly, entrepreneurs noticed a gap in the market and set out to facilitate crypto trading. The largest and most notable are Coinbase, FTX, GeminiBlockFi, and more.
FTX was famous for raising billions of dollars in venture capital funding and was considered Coinbase’s biggest competitor. However, in late 2022, the company filed for bankruptcy after realizing it was at the root of an alleged Ponzi scheme. BlockFi also filed for bankruptcy not long after the collapse of FTX due to a loss of confidence in the crypto economy.
At a time when cryptocurrencies are battling public image issues, Coinbase has weathered the storm with all its might. Between a drastic reduction in workforce and reduced usage on the platform, Coinbase has managed to survive. However, after the earnings report a few weeks ago, some Wall Street investors believe Coinbase may have some long-term long-term momentum.
In 2022, Coinbase reported total revenue of $3.1 billion. By contrast, in 2021 total revenue he had $7.4 billion. This significant decline in earnings flowed directly into earnings, as the company reported a net loss of $2.6 billion for him in 2022, compared to his $3.6 billion net profit in 2021.
While financial results can be attributed to macro events such as the fall in FTX, Coinbase’s own key performance indicators shed light on current investor sentiment towards crypto. It fell from $278 billion in 2021 to $80 billion by the end of 2022. In addition, trading volume fell from $1.7 billion in 2021 to $830 million in 2022.
As a result of this overwhelming performance, Coinbase’s stock price has fallen more than 60% over the past year. But despite mounting losses and a plummeting share price, the stock is actually up more than 80% year-to-date as of this writing.
Given the company’s volatility in earnings and profitability, it’s no surprise that the stock has fluctuated so dramatically. Additionally, traditional metrics such as price versus revenue or price versus sales may prove less useful to Coinbase, given the degree to which companies’ performance fluctuates.
By zooming out, investors can realize that the stock may be undervalued despite lackluster financial performance. It can be argued that cryptocurrencies still have long-term long-term tailwinds.
Use cases and specific tokens are still in development, but the emergence of digital currencies does not seem to have disappeared. standing.
Who’s watching on Wall Street?
Cathy Wood is the Chief Executive Officer of Ark Investment Management. Wood’s bullish stance on growth companies has made her a regular headline in financial journals. More specifically, Wood often forgives short-term losses in businesses that she believes will become industry leaders in the future.
Wood has long been a Bitcoin proponent, but her fund appears to be a fan of Coinbase stocks as well. Wood sold a large stake in Coinbase over the summer, reducing her total position from 8.4 million shares to 2.5 million shares, according to her investment profile.
Beginning in August, investment managers began slowly accumulating Coinbase stock again, and continued to buy, especially in November and December, when the stock was trading in the $30 price range. Earlier in the day, he seems to have doubled down on his bullish stance, as he bought about 1 million shares at an average price of about $60 per share.
Please note that cryptocurrencies are in their early stages. For now, it’s a highly speculative asset class. However, Coinbase’s survival in a turbulent market combined with the support of prominent tech investors may justify a small position in the portfolio.At least if you’re already a holder, now’s the time to add more It may be time to lower the cost base.