Reasoning Behind The COINBASE GLOBAL Recommendation....
(as presented to Weekly
Options USA Members on Wednesday, June 15, 2022)
On Wednesday, June 15, 2022, we
executed a Weekly Put Option on Coinbase
Global providing members with a potential
return of 74%.
Many of the catalysts mentioned at that time are
still applicable today.
In the area
of cryptocurrency Coinbase
Global Inc (NASDAQ: COIN) is cutting its workforce by 18%, according to an 8-K
filed by the company on Tuesday, as the crypto market continues to get hammered
on expectations of more aggressive Federal Reserve interest rate hikes.
reduction will shrink the company’s workforce by 1,100 employees to 5,000 in
total by June 30, according to the filing.
announcement adds to a litany of bad news for the crypto industry, with the
total value of crypto assets dropping by 25% over the past month from $1.24
trillion to $929 billion as of Tuesday morning, according to Coinmarketcap.
"We appear to be entering a
recession after a 10+ year economic boom. A recession could lead to another
crypto winter, and could last for an extended period. In past crypto winters,
trading revenue (our largest revenue source) has declined significantly," Coinbase Founder and CEO Brian
Armstrong said in a blog post that announced the layoffs.
“We grew too quickly," Armstrong added.
Coinbase said it would slow hiring and rescind some job offers, a far cry from
the company’s original goal at the beginning of this year to triple its
announced on Tuesday will “incur
approximately $40 million to $45 million” in restructuring expenses,
according to the filing, but the company did not change the outlook it provided
in May when reporting its most recent quarterly earnings.
"Coinbase has survived through
four major crypto winters, and we’ve created long term success by carefully
managing our spending through every down period," Armstrong wrote. "Down markets are challenging to
navigate and require a different mindset."
of bitcoin holders using Coinbase Global as an exchange likely are facing losses,
after the largest cryptocurrency fell to $20,834 late Monday, the lowest level
since December 2020, according to analysts at Mizuho.
trading at around $20,400, down 7.77% over the past 24 hours and almost 70%
lower from its all-time high in November, according to CoinDesk data. (This
was at 6:27 – and fluctuation continues).
survey pegged the average cost basis for bitcoin holders on Coinbase Global at
$21,000, based on a poll of 145 customers on the exchange. With the
cryptocurrency falling below that figure, they estimate roughly half of
holders surveyed would be facing losses.
plunged below its current realized price of $23,430, according to data at
Glassnode. The metric represents the average price of every bitcoin in supply,
valued at the last time it was last spent on the blockchain.
has dipped below its realized price “outside
the deepest and latest stages of bear markets,” the Glassnode analysts
wrote in a Tuesday note. The last instances when it dropped below such levels
were in March 2020, and the end of the 2018-2019 bear market.
Coinbase Global is estimated to have seen $220 billion of total trading volume of
crypto for the second quarter, well below its $309 billion volume in the
first quarter, analysts at Mizuho wrote in a Tuesday note.
estimated average daily trading volume on Coinbase Global at $1.7 billion from
June 1 to June 11. If recent weakness lingers through the end of the year, the
company’s total volume in 2022 would be about $836 billion, potentially
translating to $3 billion of revenue, or 30% below current consensus, the
Mizuho analysts wrote.
cryptocurrency rout comes against a backdrop of higher interest rates, as
central banks wrestle to keep inflation under control. Earlier this week, the
Bank of England raised interest rates from 1pc to 1.25pc. Inflation is running
at a 40-year-high of 9pc and could hit 11pc later this year.
head of crypto and digital assets strategy at Bank of America Corp, told
clients that in this climate investors were shifting focus to projects with "clear road maps to cash flow and
profitability versus purely revenue growth".
“Investors are continuing to position defensively
following last year’s liquidity-driven digital asset bull market."
senior market analyst at Oanda, added the recent news flow "has been terrible for cryptos". "Surging recession
fears are crippling appetite for risky assets and that has crypto traders
remaining cautious about buying Bitcoin at these lows."
The slump in
prices is rippling across the crypto industry, with one of the world's largest
companies in the sector Coinbase this week announcing plans to cut almost one
in five roles, equal to around 1,100 jobs.
Armstrong, the chief executive of the company, warned over what an economic
downturn could mean for the industry. “We
appear to be entering a recession after a 10-plus year economic boom. A
recession could lead to another crypto winter, and could last for an extended
period," he wrote to staff.
Coinbase Global lets
people buy and sell Bitcoin and other cryptocurrencies. Its shares have fallen
85% since its flotation in New York in April last year, when it landed a $86bn valuation.
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