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Coinbase (NASDAQ:COIN) stock started the session down 12% today before paring back some losses. At the moment, COIN stock is now down about 7%. A tumultuous wave of sector-specific headwinds are negatively impacting the company, eroding confidence and sentiment toward blockchain-related enterprises.
Fundamentally, interest in cryptos is suffering a catastrophic decline, weighing heavily on downwind names like COIN stock. Most conspicuously, the total market capitalization of all blockchain-based digital assets hit $3 trillion last November. Since then, the sector has shed more than $2 trillion in market value. At the time of this writing, data from CoinMarketCap reveals that the total valuation now sits at about $990 billion.
If that wasn’t bad enough, information from blockchain security firm Chainalysis reveals that crypto hacks have reached all-time highs. Obviously, this matter imposes grave concerns about confidence and stability in cryptos. It also undermines the mass adoption of digital assets, heaping more pressure on COIN stock.
Recently, Coinbase revealed the extent of the damage, with revenue falling more than 50% year-over-year (YOY) to $576 million in the third quarter. Unsurprisingly, the company has also failed to earn money since January.
On top of it all, Germany’s financial regulators recently ordered Coinbase’s local unit there “to ensure it has effective risk management and internal controls in place after uncovering ‘organizational deficiencies’ during an audit of the firm’s financial statements,” per a CoinDesk report.
Crypto Fallout Continues to Pound COIN Stock
Unfortunately for stakeholders of COIN stock, the negativity doesn’t just center on internal woes. Rather, some titans of blockchain are now locked in fierce disputes, spilling over into major losses for top cryptos.
According to The Wall Street Journal, conflict has erupted between Sam Bankman-Fried — the founder of FTX and Alameda Research — and “rival crypto tycoon” and Binance (BNB-USD) founder Changpeng Zhao. Per WSJ:
“Mr. Zhao this week signaled skepticism about the stability of a digital coin called FTT, a key asset produced by Mr. Bankman-Fried’s FTX. Mr. Zhao said last weekend it was poised to sell a chunk of the token in the coming months for ‘risk-management’ purposes.”
Based on another CoinDesk report, “much of the balance sheet of […] Alameda was made up of FTT. The coin is relatively illiquid, meaning it’s difficult to trade without affecting the price.” One of the risks associated with such high exposure to a largely unproven asset is that it can spark the equivalent of a bank run in the crypto space, sparking more instability in the system.
While the above conflict doesn’t directly involve COIN stock, the reality is that the wider industry is intertwined. Whatever impacts affect major players tend to roll downhill, posing significant anxieties for Coinbase shareholders.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.