Coinbase terminates Japan operations, why is share price still up 50% in two weeks?

Key Takeaways

• Coinbase is halting all operations in Japan, citing “market situations”
• Final week it lower 20% of its workforce, having already lower 18% final June
• Inventory value is up practically 50% on the yr amid crypto rally, however remains to be 85% off its peak
• Issues are aplenty on the firm, whereas CEO Armstrong bought 2% of his stake in October

Coinbase has been in a world of ache not too long ago.

Simply final week, the change introduced it was shedding 20% of its workforce, having already lower 18% final June. I wrote a chunk analysing what this meant for the corporate, which was buying and selling at a market cap beneath $10 billion, 90% down from the worth at which it went public in April 2021.

This got here after CEO Brian Armstrong unloaded 2% of his stake within the firm in October, after which I wrote a deep dive analysing what all of it meant for an organization that has been considered because the torch-bearer to hold crypto into mainstream circles as soon as and for all following its high-profile floating on the Nasdaq.

However right now, extra dangerous information got here. The change introduced it’s halting all operations in Japan, citing “market situations”.

Coinbase inventory value on the up

Regardless of the onslaught of dangerous information, Coinbase’s share value has been a giant winner within the early weeks of 2023, up 48% in simply 18 days.

This comes amid the largest crypto rally in 9 months, which has seen costs surge throughout the board. Whereas the bounceback in Coinbase’s share value is nice information for traders, it additionally sarcastically sums up precisely what the issue is – Coinbase’s correlation to the crypto market.

There are few issues extra risky than crypto, so it’s not excellent news to be tied on the hip to its value motion. However Coinbase’s efficiency relies on the crypto market as a result of as the worth falls, transaction volumes and curiosity within the business, and by extension Coinbase, plummets.

Through the pandemic, this was a fantastic factor. The cash printer was on most energy, rates of interest have been low and retail traders have been all aboard the FOMO practice, armed with a wholesome curiosity about crypto and a fats stimulus cheque.

However with the altering macro surroundings, the crypto business has freefallen from $3 trillion to $800 billion, earlier than this latest surge popped it again above $1 trillion.

Why are Japanese operations ceasing?

Regardless of the nice pump this previous few weeks, zooming out tells you that Coinbase has shed 85% of its worth since going public, gone via two rounds of layoffs, seen its CEO promote 2% of his inventory in October and now could be ceasing operations in Japan.

All Japanese Coinbase prospects can have till February 16^th to withdraw their holdings from the platform. In the event that they fail to take action, the remaining property might be transformed to Japanese yen. Coinbase had labored exhausting throughout the earlier crypto winter to broaden into the Japanese market, so the abrupt departure is a disgrace.

However Coinbase just isn’t the one change to make this transfer, with rival Kraken additionally saying it was ceasing Japanese operations final month. Additionally like Coinbase, Kraken had lower a big chunk of its workforce, shedding 30% of workers after the FTX collapse shook the market. The plight of Coinbase’s excessive correlation with the crypto market is as soon as going through exchanges throughout the business.

Coinbase Q3 outcomes revealed that transaction quantity fell 44% from Q2. The autumn in quantity and curiosity in the end is what has induced the plummeting share value, layoffs, and now ceasing of Japanese operations, with a look at Google Developments all it’s good to see the size of the dropoff within the public’s consideration to the change.

For $COIN traders, they’ll hope that the previous few weeks of softer macro knowledge and a crypto bounceback are an omen of issues to come back, in any other case this share value rally might be short-lived.