Two days after the beta release of a new NFT marketplace, Coinbase’s shares dropped to an all-time low during Friday’s trading session.
The business revealed aspirations to join the NFT industry back in October of last year and over 1.5 million individuals signed up for the queue. The beta launch began on April 20.
According to Yahoo! Finance statistics, Coinbase’s stock has been declining since the beginning of the month, and the beta launch this week did not alter this trend. As of Friday’s end, $COIN had fallen as low as $131.25.
However, only a small number of users have access to purchase and sell Ethereum-based NFTs with payments made in ETH during the beta launch stage. The startup wants to incorporate more blockchains in the future, as well as introduce some unique features that will enable consumers to participate more.
John Todaro said the fundamental issue is whether or not the NFT marketplace will thrive. Everyone has known for months that it was coming.
When investors ask him, “Can you really grow it, can you do volume, can you really compete with Open Sea?,” he tells the Block. “Will this truly increase income or will it merely debut and maybe fade out?”
FTX.US and Binance, two big crypto exchanges who established NFT markets last year, are also putting pressure on Coinbase, in addition to industry leaders OpenSea and LooksRare.
Todaro added Needham & Company put out a note indicating that, if it came to scale, Coinbase’s NFT marketplace might very gradually contribute to revenue.
According to him, “We remain optimistic on the stock, we believe it’s fundamentally quite appealing.” He said. “If they can bring it to scale I believe it’s really going add to the stock.”
JMP Group said in research released in February that the NFT market may help Coinbase in the long term. “The firm is investing in a variety of areas that may not have as much of an immediate effect, but should add considerably to longer-term revenues, including its future NFT platform,” the study stated.
As Arca’s co-founder and chief investment officer Jeff Dorman said, it’s still too early for Coinbase’s NFT marketplace to convince investors of its value.
“Since NFTs as a whole are still not generally appreciated or recognised by TradFi, we feel you’ll need to see genuine traction for multiple quarters before any equities analysts give Coinbase credit for it,” he told The Block via email.
Coinbase’s “lower than anticipated multiple,” according to Dorman, is due in part to the assumption that trading costs would continue to decrease. The fall in retail has placed more strain, he claimed.
“Until Coinbase’s subscription and services business lines make up a bigger share of their income, Coinbase will continue to struggle in low volume/low retail environments,” Dorman added.
The stock performance of Coinbase in the previous several months, according to Todaro, has also been reflective of larger market movements. He pointed out that interests rates have hurt tech stocks in general and that, more specifically, retail crypto and trading volumes have been down.
“So investors are also trying to understand ‘are we in a new scenario here where retail crypto trading activity is substantially lower than it was for 2021,” he added.