on the crypto
Cryptocurrency investors are poised for a wild ride, as are the stocks associated with this highly volatile asset class.
Coinbase Global (NASDAQ shares: COIN) closed Wednesday at an all-time low after a wild trading session that saw the price of Bitcoin fluctuate around $ 10.000. The largest cryptocurrency exchange in the United States fell as much as 13% before reducing the loss to close with 5,9% at $ 224,80. The next day, Coinbase gained around 3,8% to close at $ 233,39.
Since it went public last month, Coinbase has lost more than a third of its value. The decline is prompting some proponents of this asset class to buy the falling stock.
Big investors think about it too!
Ark Invest's Cathie Wood is doubling her bet on Coinbase, buying more shares of the exchange as its value decreases. Wood bought more than $ 90 million in Coinbase stock.
The head of Ark Investment Management said in an interview with Bloomberg TV that he still expects the cryptocurrency to reach a price of $ 500.000.
According to investment firm Wedbush, the volatility of cryptocurrencies shouldn't scare investors. Analyst Moshe Katri, while hedging the stock this week, gave it an “outperformance rating” with a price target of $ 275 per share.
Is the bitcoin bubble about to burst?
These bullish predictions make some logic, but retail investors should note that Coinbase's revenue is built almost entirely on the performance of Bitcoin and Ethereum, which are showing signs of weakness in the current cycle. And if this is the beginning of a bubble that is about to burst, then we still have a long way to go.
Bitcoin has suffered two crashes in its short history. Another collapse of this kind will mean a reduction in profitability for Coinbase, which generates most of its revenue from trading fees. The extreme volatility this week suggests that a collapse of this magnitude is still possible.
The recent price drop accelerated after Elon Musk, who has a cult following in the speculative trading community, said Tesla would stop accepting Bitcoin as a payment option for its electric cars, pointing to the environmental risks created by his. mining process. That sudden turnaround came after months of bullish comments it made about Bitcoin, Dogecoin, and other digital currencies, becoming one of the biggest movers in the market.
To conclude
Coinbase's stock became attractive after the steep decline, offering long-term investors the ability to buy this asset at a much cheaper price than it did a month ago when its stock was trading above $ 400.
But continued market volatility could hurt the company's revenues in the future. These uncertainties associated with the cryptocurrency market make Coinbase only suitable for investors who have very high risk tolerance and large pockets to absorb large losses.
