Bitcoin beats owning COIN stock by 20% since Coinbase IPO

To gain indirect exposure to the Bitcoin (BTC), Coinbase stock (COIN), has proven to be a poor strategy compared to just holding BTC.

COIN has fallen by almost 50% to $186 if you compare it with the opening rate at its IPO in April 2021. By contrast, Bitcoin has outperformed Coinbase stock in terms of logging fewer losses during the same period — just over 30% as it fell from almost $65,000 to about $41,700

BTC/USD (orange) vs. Price of COIN (blue). Source: TradingView

Coinbase: What’s the problem?

Although the correlation between Coinbase (and Bitcoin) has been mostly positive, it suggests that many investors view them as assets with similar value propositions. This is largely due to the hype around COIN, which could make it easier for investors to get into the crypto sector than buying Bitcoin, Ether (ETH) or other digital assets.

Daily correlation of COIN and BTC Source: TradingView

The COIN product faces increasing competition from crypto-based exchange traded products (ETP), mining stock and other crypto-enabled companies listed on Wall Street indexes. This could have decreased its popularity as the best asset to gain crypto exposure.

Related: Bitcoin will face a new milestone in 2022, as a new forecast predicts that BTC’s price will reach ‘in the thousands’

Due to its low forecasts for FY22, COIN is also at risk. Coinbase’s latest earnings report stated that crypto volatility could make 2022 unprofitable. Their adjusted EBITDA losses could reach $500 million if their monthly transaction users are lower than its guidance range.

The adjusted EBITDA margins of Coinbase. Source: JR Research

Jere Ong, JR Research’s principal analyst, stated that 96% of Coinbase’s total revenue in the fourth quarter of 2021 was derived from fees for retail transactions. This highlights the “inherent weakness” of its business model. Here are excerpts from his report.

We believe it is a good short-term investment opportunity for speculative investors. However, COIN stock is not recommended for long-term holding unless there is a high degree of conviction in its execution.

Bitcoin’s risks can be completely different

Bitcoin is quite different from shares in centralized companies like Coinbase.

Today, BTC prices are driven by censorship-resilient, decentralized ledgers that can withstand censorship, absolute scarcity, and the potential to hedge against inflation in the digital age.

The fed is doing a fantastic job with 7.5% inflation and real inflation numbers of 19.5% (shadowstats), They will soon be at Paul Volcker’s level with 30% interest rates if they do 100x more! Have #Bitcoin?
— Davinci Jeremie (@Davincij15) March 17, 2022

According to who you ask, analysts and strategists expect Bitcoin to rise to anywhere from zero to millions per 1 BTC.

The majority of crypto-exposure stocks also have suffered more than Bitcoin. The most notable examples are Canaan, one of the Nasdaq-listed mining companies, whose stock price fell by almost 80% year-overyear, and Riot Blockchain which saw a drop of 67.55% over that same period.

com. You should do your research before making any investment or trading decision.