Publicly traded cryptocurrency exchanges such as Coinbase have seen their stocks crash as the value of bitcoin continues to fall.
Coinbase is currently trading at $235.5, down from $328.28 on its public debut on April 14. On the day, it was trading at a value close to $100bn. Now, it’s lucky if it can scrape in a market cap at $62bn before the day is over. It didn’t help that the service was briefly down for some users on Wednesday.
Back in April, people like Santosh Rao, head of research at Manhattan Venture Partners, a merchant bank that was one of Coinbase’s early investors, predicted that Coinbase’s debut would be a precursor for other crypto exchanges looking to go public.
“I think you will see a lot more activity in the crypto space in terms of companies going public, use cases, regulators warming up to it,” he told Fortune at the time.
Although, he did qualify it by saying that “it all depends on bitcoin, how bitcoin is doing, and how the regulatory landscape is shaping up.”
He was right. At least about Coinbase’s fortunes being intimately linked to that of bitcoin. When Coinbase went public, bitcoin was trading at its all time high of $63,346. Since then it has fallen by 44.5% to be trading at $35,319 yesterday. Over the past 24 hours, it has recovered slightly and is currently trading at $40,332.
The tumble has been linked to a number of factors, chief among them are concerns that regulators plan to introduce new legislation to prevent cryptocurrencies from being used for criminal activities like money laundering and ransomware payments.
It’s hardly a secret that crypto has been linked with different types of cybercrooks. In 2018, Verdict observed a spate of these crypto scams on Twitter. In one case, a professional golf long driver had his account hacked to spread the scam on a Elon Musk tweet in which he declared his love for ramen.
This week, the US Federal Trade Commission data revealed that it had seen a 1,000% rise in cryptocurrency scams since October 2020. The regulator said that “one sure sign of a scam is anyone who says you have to pay by cryptocurrency. In fact, anyone who tells you to pay by wire transfer, gift card, or cryptocurrency is a scammer.”
Other reasons for the tumble include Tesla announcing that customers will no longer be able to buy its electric cars with crypto – if they ever did – and Beijing is turning the screws on digital currencies.
Coinbase is not alone in being burnt by the bitcoin tumble. Swedish crypto exchange Goobit has fallen from trading at SEK9.6 ($1.16)on 10 May to SEK6.22. Similarly, Arcane Crypto fell by about 10% on Wednesday, according to Breakit.