Shares of the cryptocurrency exchange company Coinbase Global (NASDAQ: COIN) were falling this morning, likely in sympathy with the price of Bitcoin sliding this morning. Additionally, an analyst’s investor note indicating that Coinbase’s shares could become more diluted might be helping to drive the stock lower today.
The cryptocurrency stock was down by 3.9% as of 11:09 a.m. ET on Monday.
Coinbase investors could be reacting to recent comments made by JPMorgan analyst Kenneth Worthington when he said that Coinbase’s stock is at risk of increased share dilution.
Worthington thinks that the large amount of equity that’s been granted to employees since the company went public, combined with Coinbase’s significant share-price drop lately, could result in increased share dilution for current investors, according to TheFly.com.
Coinbase’s shares were also likely sliding today as the price of Bitcoin continues its monthslong decline. Bitcoin’s price is down 52% year to date and fell by nearly 4% over the past 24 hours.
Coinbase’s stock is sensitive to the price of Bitcoin because as investors have fled the cryptocurrency market on fears of rising inflation and a potential economic slowdown, the demand for crypto exchanges is slowing down.
For example, the company said its first-quarter sales (reported on May 10) fell by 27%, and it reported a net loss of $430 million — down significantly from a $771 million profit in the year-ago quarter — because of what it called “the price cycles of the cryptocurrency industry.”
Coinbase’s stock will likely experience more volatility as investors continually try to assess what’s happening with the crypto market right now.
While many investors are still bullish on the long-term potential for Bitcoin and other cryptocurrencies, the massive decline of many crypto prices over the past year is testing the patience of many inventors and is putting pressure on Coinbase’s top and bottom lines.
Investors will get more insight into Coinbase’s financial picture when the company reports its second-quarter financial results on Aug 9.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global, Inc. The Motley Fool has a disclosure policy.