Bitcoin beats ownership of COIN shares by 20% since Coinbase’s IPO

Buy Coinbase stock (COIN) to gain indirect exposure to Bitcoin (Bitcoin) market has been a poor strategy compared to simply holding BTC.

Notably, COIN has fallen nearly 50% to nearly $186 from the opening price at its April 14, 2021 IPO. In comparison, Bitcoin has outperformed Coinbase stock by posting fewer losses — slightly more — over the same period than 30%. when it fell from almost $65,000 to around $41,700

BTC/USD (orange) vs. COIN price (blue). Source: TradingView

What is bothering Coinbase?

However, the correlation between Coinbase and Bitcoin has been largely positive so far, suggesting many investors view them as assets with similar value propositions. That is mainly because of the buzz on how COIN compares to buying Bitcoin, Ether (ETH) and other digital assets.

Correlation of COIN to BTC on a daily basis. Source: TradingView

But the COIN product faces increasing competition with the launch crypto-based exchange-traded products (ETP), mining stocksand similar crypto-enabled companies listed in Wall Street indices. This may have reduced its demand as the asset of choice for gaining crypto exposure.

Related: Bitcoin faces new ‘milestone’ in 2022 as new forecast predicts BTC price ‘in the millions’

Additionally, COIN faces downside risks due to its depressed FY22 forecasts. Coinbase explained in its latest earnings report that crypto volatility could make 2022 an unprofitable year, noting that if monthly transaction users are at the low end of their forecast range, their adjusted EBITDA losses could be around $500 million.

Coinbase’s adjusted EBITDA margins. Source: JR Research

Jere Ong, senior analyst and founder of JR Research, written down that 96% of Coinbase’s total revenue in Q4 2021 came from retail transaction fees, underscoring the “inherent weakness” of the business model. Excerpts from his report:

“We believe it presents a short-term buying opportunity for speculative investors. However, we do not encourage investors to hold COIN stocks for the long term unless you have high conviction in their execution.

Bitcoin’s risks are completely different

Bitcoin is a different beast compared to the stocks of centralized companies like Coinbase.

Absolute scarcitycensorship-resistant decentralized ledger and gold-like properties as potential Protection against inflation in the digital age are just some of the concepts that are driving the BTC price up today.

As a result, analysts and strategists predictions bitcoin anywhere from zero to reach “Millions” per 1 BTCdepending on who you ask.

Elsewhere, most crypto exposure stocks have also suffered more relative to Bitcoin. Namely Nasdaq-listed mining companies Canaanwhose stock fell nearly 80% year over year, and Riot Blockchainwhich fell by 67.55% over the same period.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should do your own research when making a decision.