Coinbase: Remains In Uncharted Waters Amidst Crypto Selloff

Coinbase stock suffered a dramatic fall of 85% since November last year when it reached its all-time high of $360.It remains tightly correlated with bitcoin and its future directly depends on how long this crypto bear market will last.It has a $6.1 billion safety cushion of liquidity which should help it withstand another year of high volatility.Investment ThesisCoinbase (COIN) has declined 80% since reaching its all-time high of $360 in November last year, eroding $48 billion of its value. So, what has happened? There are several causes. Firstly, general trend of growth stocks being hammered at times of rising interest rates and increasing equity premiums. Second, the bitcoin price collapse of 60%. And the last, but not least, its poor earnings results and the cash drainage of USD 1.58 billion in Q1-22. These factors led us to make significant adjustments to our FCF valuation model with new target price being revised downwards to $52. This price is in line with the current market, so we changed our view to hold and will monitor how things develop in the crypto market for any further analysis.Crypto SelloffAs we have thoroughly examined in our previous article, Coinbase has always had high correlation with Bitcoin (BTC-USD) due to substantial retail traders involvement and a nature of its business. Considering recent crypto selloff, it is not surprising that COIN has had a massive hit with its revenues falling by a half and it...