Coinbase Global (COIN) shares traded at their lowest levels on record Monday as the impact of FTX's multi-billion bankruptcy continues to echo through cryptocurrency markets around the world.
FTX, the bankrupt crypto exchange once run by Sam Bankman-Fried, owes its top 50 creditors more than $3 billion, court papers indicated this weekend, with new administrator John J. Ray planning to launch a "strategic review" of the various businesses in order to determine which can be salvaged, or possibly sold, and which can be restructured.
Any forced selling of FTX's assets, which at this time remain undefined, could trigger a further pullback in bitcoin prices, which are down more than 72% from their early November 2021 peak.
Concerns over the fate of stablecoins such as Tether, which claim one-to-one backing by U.S. dollar assets, as well as the pausing of withdraws at Genesis Global, the partner to the cryptocurrency platform run by Tyler and Cameron Winklevoss, have added to investor fears of a prolonged market decline.
"FTX's sudden collapse into bankruptcy is a devastating blow to the crypto sector and an overall negative for Coinbase," said D.A. Davidson analyst Christopher Brendler. "Near term, we're bracing for FTX exposures that cause more failures, but we're most concerned about potential permanent damage to investor appetite."
"Fortunately, Coinbase isn't directly exposed and should benefit from share gains and pricing power," said Brendler, who carries a 'buy' rating with a reduced $70 price target on the stock. "While a kneejerk regulatory response is another risk, clarity could help investor demand."
Coinbase Global shares were marked 9.72% lower in early afternoon trading to change hands at $40.86 each, after trading at $40.61 earlier in the session, the lowest level for the San Francisco-based group since it went public at $381 each in April of last year.
Bitcoin prices were marked 3.36% lower in early afternoon trading Monday to change hands at $15,706.40 each, a move that extends their decline to around 46% over the past six months.
Coinbase said earlier this month that overall revenues for its fiscal third quarter fell 53% from last year to $576 million, resulting in a wider-than-expected group net loss of around $545 million.
Transaction revenues were pegged at $366 million, amid a 27% sequential decline in trading volumes, but the group had hoped that recent partnerships with Google GOOLG and BlackRock BLK, as well as a host of new products, would ignite customer activity in the months ahead.
"For 2022, we remain cautiously optimistic that we will operate within the $500 million adjusted EBITDA loss guardrail that we previously communicated," Coinbase said on November 3. "This assumes that crypto market capitalization and volatility do not deteriorate meaningfully below October levels and that we do not see changes in customer behaviors."
"For 2023, we’re preparing with a conservative bias and assuming that the current macroeconomic headwinds will persist and possibly intensify," the company added.
