Goldman Sachs analysts downgraded Coinbase Global Inc. (COIN) shares after the stock price of the American cryptocurrency exchange collapsed.
Goldman Sachs analysts have downgraded Coinbase Global Inc. (COIN) shares after the exchange’s core business was negatively impacted by falling cryptocurrency prices, highlighting the difficulties the bear market presents.
According to Goldman analyst William Nance, the reason for the downgrade is the “continuing downdraft in crypto pricing,” according to a note that was acquired by Bloomberg.
The analyst said Coinbase “will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up.”
As of June 27, Coinbase still has 20 buy recommendations, 6 holds, and 5 sell ratings, according to Bloomberg. On the analysts’ suggested list are stocks that have a buy rating. Hold ratings indicate that a stock will perform about in line with the market as a whole, whereas sell ratings are requests to sell an asset.
In April 2021, Coinbase started trading on the Nasdaq stock exchange. It quickly outperformed its pre-listing reference price and eventually reached $381. At those prices, COIN’s market value was around $100 billion when completely diluted. COIN, however, has been on the decline since November, falling 84 percent to less than $58 per share. On Monday, the shares fell 8%, bringing the market cap below $15 billion.
The decline in the price of cryptocurrencies has coincided with the selloff in Coinbase stock. Bitcoin (BTC) is dropped about 70% since its November 2021 peak of about $69,000.
In addition to seeing a collapse in its stock price, Coinbase was obliged to fire almost a fifth of its employees and even revoked job offers. According to CEO Brian Armstrong, the possibility of a recession might extend the so-called “crypto winter” and cause unfavorable market conditions for a lengthy period of time.
The credit rating company Moody’s recently reduced Coinbase’s Corporating Family Rating from Ba2 to Ba3. Coinbase’s business model is dependent on trading volumes, which have decreased recently as a result of the widespread departure of retail traders, as Moody’s pointed out.