Coinbase shares have been pummeled in the last year amid a crypto market meltdown and a series of brutal earnings reports. But things are looking up for the stock lately as Coinbase has ridden a recent market crypto to notch some big gains.
On Monday, Coinbase shares hovered above $56, a 10% climb from last week and a nearly 60% increase year the year to date. The growth coincides with a jump in the price of Bitcoin, which is up nearly 40% this year.
The fundamental picture has been better in recent weeks, Devin Ryan, a Coinbase analyst at JMP Securities, told Fortune. He cited the companys efforts to decrease its expenses, the broader rally in the cryptocurrency market, and an increase in investors who are shorting Coinbase as reasons for the stocks resurgence.
Amid a prolonged crypto winter, the sudden rise in share prices of Coinbase reflects renewed optimism about crypto, whose market cap dropped by more than 50% last year according to CoinMarketCap. But recent downgrades in the credit ratings of Coinbase may be a reason for investor caution.
A day before Coinbases stock made its latest jump, the credit-ratings giant Moodys decreased its rating of Coinbases debt, attributing the reduction to the exchanges substantially weakened revenue and cash flow generation capacity. Moodys also said that, despite Coinbases recent decision to lay off roughly 25% of its staff, it expected the companys profitability to remain challenged.
And earlier in January, S&P Global, one of the largest credit ratings agencies, also downgraded the exchanges debt, citing its view that weakened trading volumes in the aftermath of FTXs collapse will continue to pressure Coinbases profitability.
The share prices of Coinbase and other crypto-tied assets often follow the peaks and valleys of the stocks of tech companies, like Amazon and Google. More generally, crypto assets are tethered more than ever to the stock market, according to the International Monetary Fund. The S&P 500 is up roughly 3% since markets opened Friday morning, and Amazon and Googles stocks are also up.
In response for a request for comment, a spokesperson for Coinbase pointed to a recent letter written by companys CEO, Brian Armstrong. Coinbase is well capitalized, he wrote, and crypto isnt going anywhere.
Despite its recent rally, the price of the companys stock is still far below its value in 2021, when the cryptocurrency exchange first went public and shares briefly trade above $300.
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