Coinbase Inventory Whipsaws after the groundbreaking Nasdaq debut

Coinbase employees spray champagne during the company’s initial public offering on Wednesday, April 14, 2021 outside the Nasdaq MarketSite in New York, United States.

Michael Nagle | Bloomberg | Getty Images

Coinbase shares lashed Thursday morning, the day after the cryptocurrency exchange went public in a blockbuster direct listing.

The company’s share price rose 6.4% before falling more than 1% at 10:15 a.m. ET. It then recovered and gained about 1%. The company said it temporarily turned off ether token withdrawals due to an issue with a recent upgrade to that currency’s network. The so-called “Berlin Hard Fork” is part of a broader effort to make the Ethereum blockchain faster and more secure.

Coinbase was briefly valued at up to $ 100 billion on its Nasdaq debut on Wednesday, a milestone for the cryptocurrency industry. The stock closed at $ 328.28 per share and valued Coinbase at $ 85.8 billion on full dilution.

Investors are responding to news that Ark Invest founder and CEO Cathie Wood topped up Coinbase shares valued at approximately $ 245.9 million on the company’s first day of trading. Wood is a longtime bitcoin bull and believes that bitcoin and other digital tokens could potentially become part of the recommended portfolio for everyday investors.

Coinbase’s debut was hailed as a “turning point” for crypto after years of skepticism from Wall Street giants and global regulators. However, there are concerns that the volatility of digital assets and regulatory uncertainties could weigh on the company’s stock price in the long run – as does stiff competition from other players like Binance, Kraken and Gemini.

“Risk management from a regulatory and operational perspective is much better at Coinbase,” Carol Alexander, a professor at the University of Sussex Business School, told CNBC’s “Squawk Box Europe” on Thursday.

“They have this solid source of income from fees and custody services too. They have no real competitor on the central exchanges because Kraken, Gemini – I don’t think they’re the next.”

Coinbase had estimated revenue of $ 1.8 billion in the first quarter of 2021, a nine-fold increase over the same period last year, while profits rose from $ 32 million to $ 730-800 million. Coinbase’s number of monthly transaction users rose from 2.8 million three months ago to 6.1 million.

BTIG analysts gave Coinbase a buy rating on Thursday and a target price of $ 500 – 50% more than the company’s closing price on Wednesday.

“We believe that COIN, the most popular cryptocurrency exchange for consumers in the US, is a major beneficiary of the increased adoption of Bitcoin and other digital assets as it continues to grow in the US and internationally,” the brokerage firm wrote in a note to customers.

Coinbase held 11.3% of the world’s crypto assets as of March 31, and BTIG analysts said that market share was the “core” of their bull case for the company. If the market value of all cryptocurrencies – currently standing at $ 2.2 trillion – continued to rise, “the company’s upward trend could be immense,” they said.

Bitcoin bulls are betting on more mainstream investors warming up in the crypto space. Tesla placed a $ 1.5 billion bet on Bitcoin earlier this year, while major U.S. banks like Morgan Stanley and BNY Mellon are offering crypto services for their customers.

The most popular digital currency hit a record high of more than $ 64,000 ahead of Coinbase’s debut on Wednesday, but has since slimmed down profits a bit, trading to $ 62,473. Nevertheless, since the beginning of the year the price has been more than doubled. While Bitcoin proponents see it as a gold store resembling gold, critics argue that it could be one of the largest market bubbles in history.

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