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Crypto: Coinbase and Robinhood down substantially from record highs

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Yahoo Finance’s Jared Blikre discusses the stock declines in crypto exchanges Coinbase and Robinhood as cryptocurrencies like bitcoin mature.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Welcome back to "Yahoo Finance Live." Yahoo Finance's Jared Blikre is here with a look into the markets. Jared, I'm so excited about you to talk Coinbase couldn't get the words out of my mouth.

JARED BLIKRE: Yeah. Well, hey, we had our company of the year announcement last Monday, that was Microsoft. And this is a runner-up, Coinbase is a runner-up to our company of the year for a number of reasons. This was a breakout year for crypto in general. We saw the meteoric rise, we saw a number of crypto assets, not the least of which are Bitcoin and Ether hit record highs. And Coinbase is a firm whose tie-- whose fortunes have been tied to the market, that is crypto assets, and to a very high degree.

So let's go to the Y Fi Interactive and go through a few charts. By the way, David Hollerith and I are writing this up today, we're going to publish this in a few hours with some snazzy graphics, so encourage everybody to read it. But what we're looking at here is our crypto stocks and let's see if I can find Coinbase, there we go. It's up 2.5% today and if I pull up a year to date, this is actually not the entire year, of course, it IPO-ed I believe in April. And you can see, pretty steady decline right there in the beginning but the fortunes of Coinbase as I said are tied to crypto.

So let me go to a comparison chart I prepared here, this is Bitcoin versus Coinbase and we'll put a year to date on this as well. And you can see that Bitcoin had a nice rise to record highs, those were hit in May, then as its price was declining, that's precisely when the IPO came to market. So you can see Coinbase is down here. You can see the very high correlation with the price of Bitcoin here and it looked very similar for a lot of other crypto assets. My point is a lot of analysts are positive on this stock and they want it-- they want to see the company diversify into other assets.

So I'm going to go back to our crypto heat map and just let me pull up a chart of Bitcoin by itself here because we've gone through this several times. Here is the year to date on Bitcoin by itself, having come off the highs here, it's off, I don't know if this is about 30% or so trying to find some support around 45,000. But back to the main point, there is an interesting diversion this year with Coinbase particularly centered around the DeFi movement. And so the DeFi movement is really trying to earn assets for customers on their crypto assets. So there's $2.25 trillion worth of crypto assets out there. Some of them are earning interest because of this nascent movement but so far, it's largely prohibited in the US. Coinbase tried to make an offering to customers to pay 4%, the SEC shut it down. There was kind of a famous tweet-storm that we get into in the article.

Really interesting to see the dynamics here. I used to work with the SEC on a number of projects. And I can see how it could have potentially spiraled out here and I can see how things could have gone wrong. But I think the takeaway here is that the crypto industry is still fledgling, still trying to figure out the institutional involvement, and with crypto asset prices depressed, if that persists for a long period of time you lose a little bit of interest. But I think it's a good thing for crypto overall because it shakes out some of the weaker players. A loose metaphor would be the Halvening.

And another thing we get into in the article is that we actually had two halvings within the last, let's say 18 months. One was the Bitcoin halving, which is bullish long term because that means miners are paid half what they're normally paid for mining Bitcoin. And the other is a crackdown by the Chinese government on Bitcoin, specifically banning all crypto payments. So this flushed out a lot of weak players in the industry and I think prices are probably coming back to I guess in the securities industry, they would say priced to perfection they were, well they're coming back down in terms of value terms. No necessarily-- not necessarily saying that there are fundamentals behind this but all in all, I would say the prospects for Coinbase as the leading US exchange probably looking good here. And a lot of positive analysts' commentary that we cover in the article here.

JULIE HYMAN: You know, Jared, it's interesting that you talk about people wanting Coinbase to expand, to diversify beyond just its crypto offerings. It has, of course, a competitor that is more diverse and it hasn't helped that stock so much. I'm talking, of course, about Robinhood, which has had a rough couple of months.

And one of the other trends I think besides just that correlation with Bitcoin for Coinbase, is just you know, you and I talked a lot earlier in the year about so-called thirsty cash, right? There was a lot of liquidity in the system, it was looking for a place to go. These were two destinations but really in the past couple of months, we've seen a lot of that thirsty cash find another place.

JARED BLIKRE: Yeah. You know, it's a double-edged sword, Julie, because a lot of new investors were coming into the market when it was really easy to make money. And in fact, I think the retail investor perpetuated the longevity-- the initial longevity of some of these strategies but that longevity was limited. So I think it started in November, the election last year we saw this huge risk-on rally, this mad dash, thirsty cash, not only into value stocks, and that's kind of where the deep value analysis came in here, but also a lot of other places. Crypto, we saw at Yahoo Finance our trending ticker pages were dominated by crypto names and that has to do with the rise in asset prices.

So I think it was kind of a virtuous cycle here-- and I'll get to Robinhood in a second-- that we would finally get the retail trader not only participating but also exacerbating a lot of the price movements and then you combine it with the fact that Robinhood, this up and coming brokerage firm that kind of paved the way for no fees. You know, you talk about the gamification of the industry, maybe they went a little bit too far. But this is a company now that they have matured into the IPO phase-- and let me pull up a chart here excuse me, I have on the Y Fi Interactive our exchanges heat map, where we have not only Coinbase but the CME, ICE, that's the parent company of the New York Stock Exchange, we have Robinhood here.

And we can see from its IPO day I think the high was put in either on that day or very soon after. It's been quite a big decline. I think it's down 70%, 80% from that high. So Robinhood as I was saying, kind of coming into their own, maturing, they had to pay a record fine to FINRA, that was a bit embarrassing they've had some embarrassing outages but they finally installed a telephone line which I thought is very important. I was kind of hammering that so that customers can actually call them in their time of need. I think that's kind of the mark of a maturing brokerage for us.

I'm not as bullish on the technicals here of Robinhood. I'm not that bullish on Coinbase the technicals but especially not Robinhood, given the fact that it's a falling knife. But I think they're finding their footing now and I think they're becoming more customer-oriented, which is a necessary feature in this industry if you're going to play right.

BRIAN SOZZI: Yeah. If you love Robinhood at 70, Jared, I guess you have to like it at 18 too. Looking forward to reading your story on Coinbase. Jared Blikre, thanks so much.