Coinbase Global Inc. fell to a record low as investors fled newcomers to the rapidly growing market.
The largest cryptocurrency exchange operator in the U.S. fell 6% to $256.76 on Thursday, the fourth consecutive day of decline.
It puts the stock slightly above its reference price of $250 for a direct listing in April. Exchange-traded funds, which track the stocks of recently listed companies, plunged for the eighth consecutive day. It is the most extended decline since 2015.
Virgin Galactic Holdings and Opendoor Technologies Inc., which went public through blank checks, each fell at least 3.8%.
Nasdaq has set a reference price of $250 per share for the direct listing of Coinbase on April 13. It is a requirement for the stock to start trading, but it is not a direct indicator of its potential market value.
What could be the reason for Coinbase’s stock price drop?
Let’s talk about the reasons that could affect Coinbase stock. Coinbase is public through a direct listing, which allows insiders to sell shares immediately. They can do It without the usual initial public offering lock-up period that limits the supply of initial shares.
Last year, we also saw a similar trend. The stocks of Palantir Technologies and software maker Asana went public through a direct listing. After the initial public offering, the shares of both companies have been trading sideways or have fallen for several months.
Besides, many analysts consider Bitcoin price change as an influencer on Coinbase. Since the listing of Coinbase, the price of the leading cryptocurrency Bitcoin has fallen by nearly 15%. Most of its traffic comes from Bitcoin transactions. However, the cost of the largest cryptocurrency has fallen into a narrow band for several weeks. Coinbase started trading at US$381 on April 14 and then broke through US$400 at one point. Compared with the closing price of the first day, it is now 22% lower.
Additionally, the transaction fees of Coinbase, accounting for more than 80% of competitive revenue, are facing pressure as competition intensifies. Coinbase charges retail users about 0.50% of the transaction price difference, plus a fee of 1.5% to 4%, depending on how they fund the transaction. In contrast, Robinhood offers a commission-free investment in cryptocurrencies on its app. In some cases, PayPal and Square also provide lower rates than Coinbase cost.
Lastly, highly “hypothetical” cryptocurrencies such as Dogecoin and Binance coin attracted lots of investors. However, the Coinbase exchange doesn’t offer these tokens, which we could consider as another reason for the Coinbase price drop.