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Analysts at Goldman Sachs have downgraded shares of Coinbase Global Inc (COIN) as a result of the cryptocurrency market crashing in value. The bear market, which has seen the prices of cryptocurrencies like Bitcoin and altcoins in the market, has also had an impact on companies and crypto exchanges – including Coinbase which has plummeted in share value.
According to Goldman Sachs’ analyst William Nance, the reason for the downgrade is rooted in the continued downtrend in the cryptocurrency market. As noted by the analyst, 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.” According to Bloomberg, Coinbase stock has fallen by a whopping 75%. The platform still has 20 buy recommendations compared to 5 sell ratings.
Coinbase struggles, from stock to staff
Coinbase shares were listed on the Nasdaq stock exchange last year April and had a diluted market capitalisation of nearly $100 billion USD when it reached a price point at $381 (its reference price before it was listed on the stock exchange). Since November, where Bitcoin saw its all-time high price (a value it struggled to maintain and has fallen drastically since), Coinbase shares have been consistently declining, falling by a massive 84% to a price tag of $58 USD per share, with a market cap below $15 billion USD. Coinbase has also had to lay off nearly 20% of its workforce, and has had to put a hiring freeze on new positions. In the announcement of the mass layoff, CEO Brian Armstrong noted:
“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”