bouncing back but a disaster for investors to date

Key Takeaways 

• Coinbase went public in April 2021, close to the top of the crypto market and near a $100 billion valuation
• Despite a stout 141% rise thus far this year, it remains 77% off its IPO price
• It has underperformed Bitcoin significantly
• Regulatory issues cloud picture but hope remains that it can establish itself as largest fiat on-boarder

Coinbase stock is having a bumper year. The cryptocurrency exchange is up 141% year-to-date, far exceeding both Bitcoin and the Nasdaq, which have risen 77% and 31% respectively.  This year-to-date gain comes despite a 24% fall over the last month. 

And yet, despite the boisterous performance thus far this year, for those who invested in Coinbase a couple of years ago, it has been nothing but pain. The stock remains 76% below its IPO price from April 2021. At one point flirting with a $100 billion valuation, today it has a market cap of $19 billion. 

The travails of the stock sum up the struggles in the wider cryptocurrency industry over the last eighteen months. Booming during the pandemic as stimulus cheques flowed and interest rates were non-existent, the music stopped last year once inflation began to spiral. Central banks were forced to hike interest rates, with the US Federal Reserve particularly aggressive. Today, rates are north of 5%, with risk assets pulling back severely last year as a result. 

Trouble within crypto

In addition to the harsh macro climate, the crypto sector has done itself no favours. There have been several startling collapses which triggered mass contagion across the industry. The first was the death spiral of the UST stablecoin, taking down the entire Terra ecosystem and leading to a host of bankruptcies, including hedge fund Three Arrows Capital.

Crypto lender Celsius were among the other firms to follow, but it was the demise of FTX, the Bahamas-based exchange, that was the cherry on top. Bitcoin fell to $15,500 and the entire industry was in disarray. For Coinbase shareholders, despite the evaporation of a key competitor, the stock price suffered further, such was the damage to the ecosystem. 

In retrospect, Coinbase went public right at the top, walking into an oncoming storm. Marking their IPO on a Bitcoin price chart below shows how poignant the timing was. 

Yet even with bad timing, it has underperformed Bitcoin. While the…