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Coinbase plunges as FTX chaos spreads further into the crypto market

Coinbase
CoinbaseSOPA images
  • Coinbase shares dropped 6% Thursday, as the FTX fallout continues to spread.

  • About a year ago, Coinbase had a valuation of $85 billion, but shares of the crypto firm have crashed more than 80% this year.

  • FTX's collapse has shaken confidence in the crypto sector that was already in the thick of a deep bear market.

Shares of Coinbase slipped 6% Thursday as the fallout from FTX's collapse continues to hit the broader cryptocurrency market.

The decline comes despite the lack of direct risks from FTX. On Friday, Goldman Sachs said Coinbase was sufficiently insulated from the FTX crash and had a highly liquid balance sheet. But analysts still cut its price target to $41 from $49 and maintained its "sell" rating, per CoinDesk.

And in a tweet last week, CEO Brian Armstrong said Coinbase doesn't have any material exposure to FTX.

But cash flow remains an issue. After slashing 18% of its workforce already this year, the crypto exchange moved toward another round of layoffs to reduce costs, The Information reported last week.

And S&P Global Market Intelligence has estimated that Coinbase burned through $278 million in cash last quarter, despite saving $391 million in cash outlays by paying employees with stock.

The Federal Reserve's aggressive interest rate hikes this year have weighed on markets, and cryptocurrencies have been hit particularly hard. Bitcoin and ether, the two largest tokens, are hovering near multiyear lows and have failed to rebound from the crypto crash during the spring, when the collapse of certain stablecoins set off a "crypto winter."

Coinbase stock has fallen roughly 80% year to date. Its market capitalization has cratered to $11 billion after it enjoyed an IPO that valued the firm at $85 billion in April 2021.

Meanwhile, the repercussions of FTX's implosion have dragged on other projects, including the Winklevoss-led Gemini Earn and the crypto platform Genesis. Both companies announced the suspension of customer withdrawals this week.

The Gemini team said in a blog post Wednesday that it was working to help customers redeem funds from its Earn program as quickly as possible, but would not be able to meet customer redemptions or withdrawals within the usual five business days.

And Genesis Global Capital, the crypto-lending arm of Genesis Global Trading, cited "the extreme market dislocation and loss of industry confidence caused by the FTX implosion," CoinDesk reported.

Read the original article on Business Insider