Why Is Coinbase Stock Going Down?

Every way you look at it, Coinbase has had a stellar year in the stock market. Last February, the value dipped below $120, but it currently trades north of $260. Most of that growth began near the end of October when the stock went on a steady climb from $129.25 on October 30 to $324.24 on November 10. Shares reached a peak at $343.62. Since then, it has slipped below the $270 mark.

It’s been a fascinating year watching Coinbase and the cryptocurrencies it supports, including Bitcoin and Ethereum. Every time you think the company’s down, it finds a way to recover. The recent fluctuation, however, has to raise a few eyebrows. How is it that a company’s stock price can surge beyond $343 only to lose over $70 by the end of the following month? And what caused the slide?

The Presidential Election Added Fuel to Crypto Speculation

Under President Joe Biden, the Executive Branch didn’t seem very interested in taking crypto seriously. The White House and Congress established minor guidelines for cryptocurrencies, but they mostly focused on how investors should treat coins as investments when filing taxes.

Realistically, the government probably just didn’t see crypto as a major concern as it fought to control inflation and keep basic services funded. Some industry insiders, however, think the Biden Administration was borderline combative. After Donald Trump secured victory, Mike Belshe, CEO of BitGo, said the Biden Administration had been “very negative.” He went so far as to say that Trump’s victory was a clear signal from Americans that they wanted to “unlock the gridlock” that prevented crypto from reaching its potential.

Even if Belshe is embellishing somewhat, he’s not completely wrong. Biden takes a more traditional approach to neo-liberal economics than Trump, who has made money from NFTs and a portfolio of cryptocurrencies. Trump said during his campaign that he would put together an advisory panel to explore the issue more deeply. He also indicated that he would look for an SEC director with a positive view of crypto. If those things happen, Coinbase is positioned to reap the rewards.

Unfortunately for major players in the crypto industry, President-elect Trump hasn’t spent much time talking about those passing promises. So far, he seems much more intent on slashing government spending, enforcing tariffs, deporting undocumented residents, and cutting off foreign countries from America’s financial and military support.

Each day that Trump doesn’t mention crypto brings a slight chill to the market. He might have believed everything he said about embracing digital currencies, but it doesn’t look like a priority for the incoming administration. As that reality sinks in, more people lose faith that Coinbase is entering a “golden age,” and that realization has pushed the stock’s value down a bit.

Why Is Coinbase Stock Going Down?

The recent slide in bitcoin and altcoins directly affects Coinbase commissions and so COIN share price has been going down in tandem.

Coinbase released a lukewarm financial report on October 30, but the share price started rising the next day. The report showed Coinbase’s optimism even as the company posted somewhat disappointing numbers.

Third-quarter revenue was down 27% from the previous quarter, but up 81.2% year-over-year. That’s positive enough to give investors some confidence in the company’s future. It’s unlikely that such a dip between quarters would lead to a rally, though.

It’s more likely that Bitcoin’s surging value lifted Coinbase, which is the third-largest crypto exchange (and seen by many as the industry’s most reliable option). Bitcoin’s upswing propelled Coinbase by encouraging traders to invest more money in the popular cryptocurrency and giving a boost Coinbase’s own crypto investment assets.

This framework gains traction when you compare Coinbase’s and Bitcoin’s real-time values. Coinbase’s value started to fall on December 16 and Bitcoin’s saw a drop on the 17th. It’s hard to interpret the closely aligned changes in a different way.

Of course, it’s important to note that the influences of Donald Trump’s victory and Bitcoin’s shifting value didn’t occur in vacuums. Trump’s campaign has been influencing Bitcoin’s value for months. His, somewhat surprising, success in the popular and electoral vote likely gave Bitcoin a short-term push that also lifted Coinbase’s share value.

Over November and December, investors tempered their enthusiasm as they looked closer at what a Trump presidency could mean to the crypto industry and the economy overall. Some analysts remain excited because they fully believe that a Trump Administration will encourage Congress to bring crypto into the broader economy.

Others have putting more money into Bitcoin because they think investors will turn to crypto as higher tariffs and global instability push investors away from traditional markets. More realistically, Congress will continue moving slowly and carefully regardless of what the incoming president wants. As the voices of wary congressmembers cautioned Americans, they’ve reconsidered their enthusiasm and taken clearer perspective that lowered the values of Bitcoin and Coinbase slightly.

Should You Buy Coinbase Shares?

If you already own Coinbase stock, now may very well be a good time to hold them and see what the future brings. There’s a good chance that it’s value is a bit overstated at the moment, but it has still had an exceptional year. Plus, it’s easy to make a case for the company’s increasing importance in the crypto space and broader economy.

(Something not touched on above because of its relatively small influence is that Coinbase has started processing more USD transactions. It’s still in the beginning stages, but it looks like Coinbase could position itself as a payment processor in the near future. That prospect adds enormous potential to the company’s future.)

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.