Coinbase became the first major digital asset-based organization that went public. On April 14th, 2021, the cryptocurrency exchange launched its IPO and incurred significant traffic in the beginning. It reached an all-time high value of $429 per share but since then, COIN has taken a major beating. Bitcoin and the collective crypto market crashed on May 19th, and COIN prices followed suit.
Source: Trading View
The stock is currently down 36% from the initial listing price, valued at $245 at press time.
COIN and Bitcoin: similar pathways?
Bitcoin and COIN, both have been stuck under a period of stagnation over the past 3 months but right now, there might be more dependence in terms of value appreciation. Now, while COIN is its own stock uncorrelated to the digital asset industry, the organization holds BTC under and generates revenue from Bitcoin trading volumes.
According to Ecoinometrics, companies that have Bitcoin Treasuries Index such as MSTR, and mining companies MARA, RIOT, were at a higher percentage of decline, with respect to COIN. However, for Coinbase, the dependence made more financial sense.
Coinbase, as an exchange retains 0.7% of the traded volume as revenue. In context, when the exchange is facilitating $150 million in volumes, they make $1 million in revenue.
Now, this plays a huge role when the market is in a bullish cycle. Surging prices improve relative trading volumes for Bitcoin and the exchange is able to cultivate more revenue. But it is important to understand the difference that rising prices without high trading volume does not benefit Coinbase’s revenue streamline.
So what is currently happening with COIN?
At press time, Bitcoin has surged more than 10% over the past week but COIN hasn’t displayed the same momentum. One of the key reasons behind that remains inconsistent trading activity at press time since most price action is possibly driven by pre-established liquidity pools.
For the value of COIN to explode or reach its previous ATH levels of $429, its revenue for the current quarter needs to find consistent inflows which should create a positive impact on COIN’s market price.
Therefore, the price of Bitcoin does not directly impact Coinbase’s stock but activity surrounding the asset on the exchange holds key importance. Also, since the asset is also independent of market squeeze movement, so Bitcoin prices dumping alongside higher trading volumes also caters to a positive effect on COIN’s price.
