Coinbase earnings where released yesterday and showed some poor results this was mainly due to its direct correlation to Cryptocurrency

Overview

Coinbase (Nasdaq-COIN) is an American crypto-exchange founded in 2012 and is currently the largest crypto platform in the US. Coinbase stock is heavily correlated with the crypto-market as their main source of revenue comes from transaction fees, when people are buying and selling. Coinbase have four main products covering most of the crypto market. Coinbase app is an exchange for buying and selling, Coinbase pro is a trading platform, Coinbase wallet is a way for uses to access decentralised applications and Coinbase NFT which acts as a market place for users to buy and sell.

Financials

Coinbase had a rocky start to the year with the share price down 25.8% on the day and down 79% YTD. Revenue was down 22% since Q1 of 2021 at $1.17Bn which will be a direct result of the low trading volume coming into 2022. The company also lost $429m in the first 3 months of 2022. Coinbase did look postivie base don Q4 numbers, but becuase of Cryptos recent crash, its seriosuly harmed their income statement. Assests for Q1 came in at $20.8bn down $500m from $21.3bn with a -2.3% change from Q4 and liabilities also dropped to $14.4bn down $430mn from $14.8bn which is a -2.7% difference. 

Technicals

Currently the stock is in a bearish trend, recently breaking the lower trendline and proceeding lower still. RSI is very oversold at 17.9 which could result in a relief rally (as seen on 27/01/22). This means the stock could test the lower trendline before moving lower. Bearish market structure and recent break of trendline shows that the stock is yet to be in the clear and investors should expect lower prices. Intial resitance above sits at about $97/$100. This will be very tough to crack. A break above here could take Coinbase looking for $139. Towards the downside there isn't really any support below. $50 will act as minor techncial support, but it could contiune to fall if the crypto market continues to crash.

Summary

Coinbase has had a poor start to 2022 which leaves investors worried about future fluctuations in crypto price affecting the stock.  With the revenue model being based upon transaction fees, Coinbase stock will struggle holding its valuation during bear markets in crypto as crypto investors will be less likely to be withdrawing or depositing during these bearish periods. Until crypto attempts to recover would coinbase be a potential buying oppertuntiy. Consolditon in the crypto markets  will also put pressure on the stock as tradings volumes and interest would reamin low.