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Folks talking about crypto currency right now is going round the world . FRANKFURT, June 28 Germany's financial market watchdog BaFin on Monday granted the cryptocurrency exchange Coinbase permission to provide crypto custody services and proprietary trading, the first licence it has issued for such business in Germany.
The licence allows Coinbase Germany GmbH to conduct proprietary trading of crypto assets. Coinbase, which went public earlier this year, did not immediately respond to a request for comment. Coinbase, the largest U.S. cryptocurrency exchange, has seen its stock price decline by over 30% since its mid-April IPO, trading at just about $225 per share. There are two broad factors that drove the sell-off.
Firstly, the price for bellwether cryptocurrency Bitcoin has declined from levels of around $62,000 in mid-April to just about $3,000 as of Tuesday, and this, in turn, is impacting sentiment around Coinbase stock. Secondly, Coinbase went public via a direct listing, that enables early investors to sell shares on the first day of trading without the typical IPO lockup period and this also likely put pressure on the stock. Now, does the recent correction present a good entry-point into Coinbase’s stock? We think it does.
Moreover , Coinbase’s revenues are very sensitive to cryptocurrency pricing, as prices influence the number of monthly transacting users on its platform and the total value of transactions. As prices collapse, users will be less active, while transaction revenue will also decline. For perspective, over the last crypto bear market in 2018 through which Bitcoin prices plunged by over 80%, Coinbase’s MTUs fell by about 70% from 2.7 million in Q1 2018 to just 0.8 million in Q1 2019.
Coinbase’s Trading Volumes also fell from $56 billion in Q1’18 to just $7 billion in Q1’19 – a whopping 87% decline. If the bear market in Bitcoin continues, we could see Coinbase’s revenues and margins contract substantially in the coming quarters.
Lastly, Coinbase’s platform enables retail and institutional customers to buy, sell, and store cryptocurrencies such as Bitcoin and Ethereum. The company primarily reaches customers via its Coinbase, Coinbase Pro, and Coinbase Wallet apps and its websites. Coinbase had a total of about 56 million retail users as of Q1 2021. Roughly 90% of the company’s revenues (as of 2020) came from the transaction fees from trading and via services such as storage and analytics.
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