Coinbase stock (NYSE: COIN) fell over 12% yesterday as the continued fallout from FTX bankruptcy continues to take a toll on the cryptocurrency industry.
Many have called the collapse of FTX the “Lehman moment” for the cryptocurrency industry. FTX and its founder Sam Bankman-Fried popularly known as SBF emerged as a white knight of sorts bailing out smaller crypto exchanges amid the crypto winter.
However, as things turned out FTX itself filed for bankruptcy. Cryptocurrencies, which were anyways under pressure slid further amid the FTX controversy.
Coinbase’s CFO Alesia Hass echoed similar views. Speaking with the Wall Street Journal, she said, “What we are seeing now is a fallout of FTX is becoming much more like the 2008 financial crisis where it’s exposing poor credit practices and is exposing poor risk management.”
She added, “We’re gonna see a drive towards regulation both in the U.S. and globally.” Notably, there is a global chorus to better regulate cryptocurrencies. Market participants agree that better regulatory oversight of digital assets would help the market in the long term.
Notably, during their Q3 2022 earnings call also, Coinbase talked about the evolving crypto regulatory environment in the US following the White Paper that President Joe Biden issued earlier this year.
Coinbase said that the “legislation is not yet in place, and we are concerned that the regulation by enforcement practices of U.S. regulators create an incentive for crypto developers and issuers to leave the US crypto industry.”
Coinbase Does Not Have Much Exposure to FTX
COIN emphasized during the Q3 2022 earnings call that its exposure to FTX is quite low. In its release, the company said, “Regardless of whether the Binance/FTX transaction completes, we have very little exposure to FTX and we have no exposure to its token, FTT.”
It emphasized, “Currently we have $15 million worth of deposits on FTX to facilitate business operations and client trades. We have no exposure to Alameda Research, and we have no loans to FTX.”
Meanwhile, being a listed company, Coinbase’s finances are quite transparent unlike the privately held and unregulated exchanges. Coinbase has around $5 billion as cash and cash equivalents on its balance sheet which provides it with a cushion amid the continued crypto winter.
COIN’s revenues and active users have plummeted over the last year. In Q3 2022, its revenues were $590 million which was less than half of what it posted in the corresponding quarter last year.
Analysts Find COIN Stock as a Good Buy
Several Wall Street analysts have cut their target prices following COIN’s Q3 2022 earnings. However, many believe that the issues at FTX and other crypto exchanges could actually benefit Coinbase stock. Analysts predict that COIN will capture more market share. Check out our guide on how to buy Coinbase stock.
Notably, during their Q3 2022 earnings call, COIN tried to differentiate itself from FTX in order to allay investors’ concerns. It said, “Any institutional lending activity at Coinbase is at the discretion of the customer and backed by collateral. We have no gating for client loan recalls or withdrawals.”
Meanwhile, Cathie Wood of ARK Invest has loaded up on COIN stock this year. Her ETFs have however underperformed this year amid the crash in growth stocks. Value-oriented and energy ETFs are outperforming the markets this year. We have a guide on how investors can buy ETFs.
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