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Coinbase is halting all operations in Japan, citing “market conditions” Last week it cut 20% of workforce, having already cut 18% last June Share price is up nearly 50% year-on-year amid cryptocurrency rally , but it’s still 85% below peak Troubles abound at the company as CEO Armstrong sold 2% of his stake in October Coinbase has been through a world of pain recently. Last week, the exchange announced it was laying off 20% of its workforce, having already cut 18% last June. I wrote an article looking at what this meant for the company, which was trading at a market cap below $10 billion, 90% below the price it went public at in April 2021. This came after CEO Brian Armstrong unloaded his 2% stake in the company in October, after which I wrote a review explaining what it all meant for a company that was seen as the torchbearer for bringing cryptography to mainstream circles and to all who follow its lead. high profile floating on Nasdaq. But today more bad news arrived. The exchange announced that it is suspending all operations in Japan, citing “market conditions.”
Coinbase stock price on the rise
Despite the onslaught of bad news, Coinbase’s stock price was a big winner in the first few weeks of 2023, rising 48% in just 18 days. This comes amid the biggest cryptocurrency rally in 9 months which has seen prices rise across the board. While the recovery in Coinbase’s stock price is great news for investors, it also ironically sums up exactly what the problem is – Coinbase’s correlation with the cryptocurrency market. There are few things more volatile than cryptocurrencies, so it’s not good news to get caught up in their price action. But Coinbase’s performance depends on the crypto market because as the price drops, transaction volumes and interest in the industry, and by extension Coinbase, plummet. During the pandemic this was great. The money printing press was on full blast, interest rates were low, and retail investors were all aboard the FOMO train, armed with a healthy curiosity about cryptocurrencies and a fat helping. But with the changing macro environment, the crypto industry dropped from $3 trillion to $800 billion before this recent surge put it back above $1 trillion.
Why are Japanese operations ceasing?
Despite the good bomb in recent weeks, zooming out shows that Coinbase has lost 85% of its value since going public, has gone through two rounds of layoffs, seen its CEO sell 2% of its shares in October and is now winding down operations in Japan. All Japanese customers of Coinbase will have until February 16 to withdraw their assets from the platform. If they don’t, the remaining assets will be converted into Japanese yen. Coinbase worked hard during the previous crypto winter to expand into the Japanese market, so the abrupt exit is a real shame. But Coinbase is not the only exchange to make this move, with rival Kraken also announcing it was ending Japanese operations last month. Also like Coinbase, Kraken cut a large portion of its workforce, laying off 30% of employees after the FTX collapse rocked the market. The situation of Coinbase’s extreme correlation with the cryptocurrency market has already faced exchanges across the industry. Coinbase Q3 results revealed that transaction volume was down 44% from Q2. The drop in volume and interest is ultimately what caused the stock price to drop, layoffs and now the closure of Japanese operations. A look at Google Trends is all you need to see the scale of the drop in public attention to the stock.
For $COIN investors, they are hoping that the last few weeks of softer macro data and a crypto recovery are an omen of things to come, otherwise this stock price rally will be short lived.