Goldman Sachs Group Inc. analysts downgraded Coinbase Global Inc. to a sell rating as the crypto winter continues to take its toll on the struggling digital currency exchange.
With Bitcoin currently worth less than half of what it was only six months ago, the company’s shares fell as much as 11 percent to $56.02 on Monday, putting them on track to extend their 75 percent fall this year. William Nance, a Goldman analyst, blamed the “continued downdraft in crypto prices” and the general decline in sector activity levels. Nance said in a report on Monday.
“We believe 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,”
The largest US cryptocurrency exchange, Coinbase, saw its worth soar past $75 billion as Bitcoin reached a record high that it swiftly became the equity market’s leading example for the explosion in digital currency prices last year.
Since then, a long list of problems has plagued the firm, including dwindling revenues and trading volumes as the overall cryptocurrency market experiences one of its biggest selloffs in history. One of the Wall Street firms that counseled Coinbase on its direct IPO in April 2021 was Goldman Sachs.
The firm had a worth of less than $14 billion as of Friday’s close. According to information gathered, there are 20 buy ratings, 6 holds, and 5 sell recommendations for Coinbase. The typical analyst share price objective is currently around $117, which is the lowest level on record but still more than 100% higher than where the stock is currently trading.
Not only are equity investors losing interest in Coinbase, but the company’s bonds have also seen pressure, with its senior unsecured bonds due in 2031 ranking among the top losers on Monday’s US high-yield market. Nance stated:
“Coinbase faces a difficult choice between shareholder dilution and significant reductions in effective employee compensation, which could impact talent retention,”
The cryptocurrency exchange has also been hampered by increased competition from other services. Binance.US said earlier this month that it will provide fee-free trading for Bitcoin and that it has ambitions to do the same for additional currencies in the future. This month, Coinbase also said that it would be letting go of 18% of its personnel to rein in operating costs that soared to a record $1.7 billion in the first quarter.