Coinbase Global (NASDAQ:COIN) is the stock to own if you want exposure to cryptocurrency. Since it launched as a direct listing in April, however, COIN stock has also been one to own if you want to lose money.
While it carried a reference price of $250 a share, the first trade on Coinbase stock came at $381. Since then it has tracked the path of Bitcoin (CCC:BTC-USD) itself. Both are down by about one-third.
Coinbase closed yesterday just shy of $222 per share, a market cap of $58.1 billion. Track Bitcoin to June 10 and you’ll find it was trading at $38,000, down from $56,000 in April.
The Numbers Don’t Count
None of this has anything to do with Coinbase financial results. The first quarter report, issued in a May 13 shareholder letter, was spectacular.
Coinbase earned nearly $771 million, $3.05 per fully diluted share, on revenue of $1.8 billion during the first three months of the year. That’s nine times more revenue and 20 times more profit than for the same period a year earlier. Management said the second quarter could be even better.
The stock, he writes, shouldn’t be correlated to the price of crypto-currency assets, but to trading volume, which is strong. His concern is that the Coinbase “moat” is weak, that other companies can easily enter the market.
“The company operates within a very competitive industry, with razor-sharp margins,” he wrote last week. Yet Coinbase brought 42% of its revenue to the net income line during the first quarter.
No One Knows Nothing
The fact is no one really knows anything regarding cryptocurrency. Will it replace the dollar? Will it all prove to be a scam? Will it kill the cross-border remittance business? Is it environmentally friendly? Is it an environmental curse?
Real journalists are not amused. Coinbase CEO Brian Armstrong says every tech company must become a media company. Armstrong calls what he’s doing “fact-checking.” The Financial Times calls it “propaganda.” You can feel the sneer from across the Atlantic. The truth is that AT&T (NYSE:T) invented the art of public relations over a century ago. There’s nothing new here.
Traders Make the Future
As a media operation, Coinbase is joining yet another competitive market. There are several crypto-related news operations already. Many, like CoinMarketCap , are owned by crypto exchanges.
InvestorPlace is working hard to join them. So is every other media company worth its business card. So are some that aren’t. So is The Financial Times. Crypto is a hot story, drawing lots of eyeballs,
There are crypto stories to be followed. Coinbase claims institutional holdings of crypto have soared, to $122 billion. But when trading was hot in mid-May, the Coinbase exchange went dark. This prompted a class-action suit from investors. Since then, Coinbase has teamed up with a 401(k) provider to offer Bitcoin in retirement accounts.
The Bottom Line
I can’t tell you what any cryptocurrency prices will do tomorrow.
Neither can anyone else, though my editors here tell me “price prediction” is a hot search term.
That means I can’t tell you what Coinbase stock is going to do. When prices decline, some holders just become more determined to sit on their holdings. This “Hold On for Dear Life” (HODL) mentality reduces trading activity, until it pushes prices back up again.
Real currencies don’t behave in this way. I’m not HODLing dollars. I’m using them as a medium of exchange. They do their job when I buy and sell, not when they’re sitting in assets.
Until the same is true for cryptocoins, they’re not currency. They’re imaginary assets, their value at any time an arbitrary market exercise. If you want to be part of that, buy Coinbase today. I’ll pass.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at email@example.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets and politics.