The stock price of Coinbase – the biggest crypto broker in the US – jumped 13% on Friday, ignoring all the recent crypto disasters.
As per statistics from Nomics, trading activity on Coinbase fell by over 75% in the hours after FTX announced its bankruptcy early on Friday. This indicates that the firm is starting to feel the pain of crypto investors pulling out of the increasingly unpredictable cryptocurrency market.
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Dan Dolev, a senior analyst at Mizuho, said that FTX’s Chapter 11 filing is the most recent in a string of high-profile exchange bankruptcies that have devastated the cryptocurrency market and forced investors to reconsider trading cryptocurrencies altogether.
According to a source with knowledge of the situation, Coinbase Global Inc. will write off the investment its ventures arm made in the cryptocurrency exchange FTX in 2021, Reuters reported.
Low exposure against FTX
In a blog post published on Tuesday, Coinbase said that while the firm has $15 million in FTX deposits that were utilized to support customer transactions and business operations, its overall exposure is negligible.
— Investro.com (@investrocom) November 11, 2022
A source claims that Coinbase intends to take part in the FTX bankruptcy procedures in order to assert its rights to those deposits.
Most of Coinbase’s user base consists primarily of newer investors who don’t frequently trade, generating 90% of the exchange’s revenue from the sizeable transaction fees it charges. Because of this revenue model, the company must constantly add new users in order to maintain its user base.
Onboarding new users, however, might be challenging given that FTX’s collapse has undermined investor trust in the digital asset sector. As a result, the exchange will have to overcome that difficulty.
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However, Chris Brendler, an analyst with D.A. Davidson Company, sees a bright spot. As FTX users who were shocked by that business’s abrupt collapse come to appreciate Coinbase, which is legally compelled to commit itself to strict audits and generate reports on its financial strength. Furthermore, Coinbase’s status as a public corporation may help the company win over some new consumers.
“I would not be surprised if Coinbase picks up market share here,” said Brendler.
Defending key support
The stock price has defended the critical support zone of previous lows, located near 45 USD. The short-term outlook could be bullish if the stock trades above that level. The medium-term outlook might change to bullish once the price jumps above previous highs at 80 USD. In that case, the next target could be at the 200-day moving average at 100 USD.
On the downside, a clear breakdown below 45 USD should hit some massive stop losses, likely sending the price below 40 USD quickly.