Goldman Sachs cuts Coinbase rating to ‘sell’

Goldman Sachs downgrades its Coinbase rating in light of the crypto winter

Coinbase                                 
Coinbase has seen its stock fall after Goldman Sachs’ analysts gave it a sell rating – Photo: Shutterstock
                                

Coinbase stock has slipped at the start of the week’s trading as investors reacted to a recent Goldman Sachs’ report that downgraded its rating in the US cryptocurrency exchange to sell. 

Coinbase: From neutral to sell

The US investment bank had until recently rated Coinbase as neutral. In a further demonstration of the once-burgeoning cryptocurrency market’s waning momentum, Goldman Sachs’ analyst William Nance attributed the downgrade to the “continued downdraft in crypto prices” and the wider fall in activity across the crypto sector. 

He added: “We believe Coinbase will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up.” 

Nance maintained that the company faces a tough choice “between shareholder dilution and significant reductions in effective employee compensation, which could impact talent retention”.

Coinbase BTC futures

The report has overshadowed the launch of Coinbase’s Bitcoin derivative on Monday. The company’s derivative exchange will offer a ‘Nano’ Bitcoin futures contract with a price sized at 1/100th of a Bitcoin. 

Although the offering may encourage retail investors, Goldman’s report stressed its bearish outlook on Coinbase’s competitive environment. 

Crypto firms are currently chasing fewer customers, given the decline in retail trading from the heady days of 2021, the onset of a global cost of living crisis and the shockwaves caused by Russia’s invasion of Ukraine. 

The report’s allusion to the need for substantial reductions in Coinbase’s cost base and employee compensation comes only a fortnight after Coinbase fired 18% of its workforce. 

At 10:15 EST, Coinbase traded down 9.6% at $56.66. Having lost 77% of its value since the start of the year, Coinbase stock stood 83% lower than the $342 price at which it debuted in April 2021.

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