Crypto News | What’s Happening With Coinbase Stock?

 Coinbase stock (NASDAQ NDAQ 0.0%: COIN) has trended lower since it went public on April 14, falling from levels of about $328 per share on listing day to about $281 per share as of yesterday. So what’s driving the sell-off?

Firstly, Coinbase went public via a direct listing, which enables insiders to sell shares right away without the usual post IPO lockup period that limits the initial supply of shares. This could be putting some pressure on Coinbase’s stock price. We saw a similar trend last year, as well, with the stocks of workplace management software maker Asana and big data player Palantir Technologies, which went public through direct listings. Both companies saw their stocks move sideways or decline for a few months post their IPOs.

Secondly, the price of Bitcoin, the bellwether cryptocurrency, has declined by almost 15% since Coinbase went public. Coinbase’s revenues are quite sensitive to cryptocurrency pricing, as prices influence the number of monthly transacting users on the platform and the total value of transactions. If prices continue to trend lower, this could impact Coinbase’s revenue and profitability for this year.

Thirdly, there are concerns that Coinbase’s transaction fees – which account for over 80% of its revenues – will face pressure as competition rises. Coinbase charges retail users a spread of about 0.50% for transactions, besides another fee of between 1.5% and 4% depending on how they fund their trades. In comparison, Robinhood offers commission-free investing in cryptocurrency on its app, while PayPal PYPL +1.9% and Square SQ -3.4% also offer lower fees compared to Coinbase in some scenarios. Moreover, the crypto markets are still in their early stages of development, and it’s likely that many more players will enter the fray and potentially drive down transaction fees and profit margins for Coinbase.