Coinbase: Down 25%, Further Declines To Come?

Summary COIN remains overvalued and is not a prudent investment for crypto bulls, even after a 25% price drop since my last bearish call. COIN’s fundamentals do not justify its current valuation, especially compared to the more direct crypto asset, ￰0￱ in COIN is riskier than simply holding BTC, as history shows peripheral assets often underperform the main asset. competition, overvaluation versus established exchanges, and low barriers to entry further undermine COIN’s long-term prospects. I previously issued a bearish call on Coinbase ( COIN ) and since then its stock price has declined by 25%.

I continue to hold a bearish view and believe COIN is overvalued and not a good investment for crypto ￰1￱ reasons are as follows: Analyst COIN rating (Seeking Alpha) #1 Investors must be discerning even in a bull market, to have a margin of safety: I think even if this is a bull market, one has to be ￰2￱ markets can shift to bear markets, and there has to be a defensive element to any investment. i. e., investors that bought BTC during the last peak lost about 77% at the trough (from $69k/coin to $15.5k/coin), but those that bought COIN at the previous peak would have suffered over a 93% drawdown (from $460 to $31). Bitcoin price ( StockCharts ) Coinbase price (Seeking Alpha) #2: COIN does not have the cards (i.

e., fundamentals) Then comes the consideration of whether COIN even has the fundamentals to sustain a bull move, which I would evaluate as probably ￰3￱ if an asset class is performing well, different assets benefit differently, and while the difference may not be visible in a few days or a few weeks, it becomes significant over time, and fundamentals eventually drive ￰4￱ example, COIN is up almost 1000% compared to its low point in late 2022, while Bitcoin ( BTC ) is “only” up 640%. Yet, BTC has been relatively stable in the past month, while COIN is down 25%. That’s because COIN was being highly undervalued compared to its potential in 2022 (when I made my bullish call during the crypto winter ).

But now that COIN’s potential as an exchange is richly priced, COIN’s performance may diverge from that of ￰5￱ are also important as they mark the potential ceiling for an ￰6￱ has a market cap of $23 trillion , if BTC proves a capable contender for gold as digital gold, it could aspire to be worth much more than its current market cap of $2.3 ￰7￱ COIN is only loosely correlated with BTC and ￰8￱ is arguably a store of wealth, while COIN only benefits if people trade ￰9￱ investors just hold their BTC as a long-term store of value and trade them around less, COIN’s business would dwindle, even if BTC’s value ￰10￱ on that below. #3: It may be better to directly invest in the main asset than peripheral assets correlated with the main asset Betting on "second order effects" is ￰11￱ example, it's like betting on gold miners instead of just buying gold, while the returns are sometimes higher, there is greater risk and uncertainty of returns compared to just buying the store of value ￰12￱ miners have substantially underperformed gold in the past 20 years, as shown below; while GLD (ETF for gold) would have gained 600% in the past 20 years, GDX (ETF for gold miners) would have gained around 50%, with significant drawdowns in ￰13￱ price history (stockanalysis.

com) GDX price history (stockanalysis. com) Junior gold miners (represented by ETF GDXJ) have done even worse, losing value over a 16 year stretch! GDXJ stock price history (stockanalysis. com) While the relationship between miners and gold is not exactly the same as that between COIN and BTC, I think the point is clear, betting on “second order effects” could be dangerous long ￰14￱ an investor is bullish on the main asset, it may be better to buy the main asset instead of searching for “extra” gains that might severely underperform the main asset. #4 overvalued comparison with other exchanges When compared with other non-BTC exchanges, COIN is still overvalued, in my ￰15￱ cap at Aug 24 2025 ( CME ) $97bn ( ICE ) $103bn ((COIN)) $82bn) further proves out my ￰16￱ barriers to entry are so low that some private equity firms (PEs) can just back another startup to fight for a slice of the pie and an IPO with a current market cap of $10bn.

It also means valuations are probably too rich (such as COIN’s $82 bn) to make PEs want to invest in such ￰17￱ don’t see PEs eagerly invest in INTC to spend tens of billions of dollars to upgrade foundries because the return is highly uncertain for the amount ￰18￱ the fact PEs are willing to sink money into yet another crypto exchange shows they see the pay-off at current ￰19￱ to bearish thesis It is possible that market exuberance and general positive environment for stocks and crypto lifts COIN, or COIN could come up with some exciting new ￰20￱ I seriously doubt this will change the long-term ￰21￱ COIN is overvalued and not a good way to gain crypto ￰22￱ latest view of caution is consistent with my previous ￰23￱ has fallen 25% since my previous article, and I believe it could well fall substantially more even if BTC prices are flat or go ￰24￱ an investor is bullish on crypto, he may consider just buying BTC and not COIN.