Coinbase Slides Nearly 20% in Worst Weekly Performance Since September 2024
Coinbase (COIN), a Nasdaq-listed cryptocurrency exchange, experienced a significant downturn last week, with its share price plummeting 19.6% to $314.69—its worst performance since September 2024. This sharp decline followed the release of the company’s second-quarter earnings report, which revealed weaker-than-expected results.
The report showed a net operating earnings per share of 12 cents, representing an 88.8% year-over-year decrease. Revenue reached $1.5 billion, falling short of FactSet’s $1.59 billion projection. Further contributing to the negative sentiment, EBITDA declined to $512 million, while transaction revenue dropped by 39% compared to the previous quarter.
This price slump aligns with a late June analysis from crypto research firm 10x, which suggested that the second-quarter price rally was overvalued relative to the underlying fundamentals. The firm advised shorting COIN while simultaneously buying Bitcoin (BTC). This bearish outlook was echoed earlier in July by investment firm H.C. Wainwright, which downgraded Coinbase to “Sell” from “Buy,” citing a disconnect between the second-quarter rally and fundamental factors.
The market’s response to Coinbase’s performance is evident in the increased demand for put options. These options, which provide downside protection against price losses, are now trading at a significant premium. As of Friday, the one-year put-call skew reached 2.6%, its highest level since April 21, indicating a considerable demand for hedging against further price drops. This skew measures the implied volatility difference between put (bearish) and call (bullish) options, with a higher skew signifying a greater preference for put options. The 2.6% figure highlights a substantial volatility premium on put options relative to call options. This heightened demand for downside protection reflects investor concerns regarding Coinbase’s future prospects following its disappointing second-quarter results. The significant drop in share price and the increased demand for put options paint a picture of considerable uncertainty and bearish sentiment surrounding the company.
