Shares of Coinbase Global Inc. tumbled in active trading Tuesday as the cryptocurrency platform faced concerns over increased competition from the Binance-FTX merger deal.
The stock COIN, -10.78%, which was down 13.2% in afternoon trading, was headed for its first close below the $50 mark since July 1. Trading volume ballooned to 54.2 million shares, compared with the full-day average over the past 30 days of about 11.4 million shares.
The selloff comes after Binance, the world’s largest crypto exchange, said it had signed a letter of intent to buy rival FTX, which faced a “significant” liquidity crunch.
“This is a big deal,” wrote Bernstein analyst Harshita Rawat in a note to clients. “Even though Binance and FTX don’t directly compete with Coinbase (Binance.US and FTX US do, but they are much smaller), we believe this deal represents a seismic shift in [Coinbase’s] competitive landscape.”
Rawat reiterated the market-perform rating she’s had on Coinbase stock since she started covering the company soon after it went public in April 2021. Her $46 stock-price target implies a further 7% drop from current levels.
A Binance-FTX combination would represent a “significant consolidation and a global crypto powerhouse in crypto trading,” Rawat said. It also creates a “formidable” position in international markets, which is a growth market for Coinbase.
Separately, bitcoin BTCUSD, -11.37% plunged as much as 16.8% intraday before paring losses to be down 12.8% in afternoon trading. That puts it on track for its lowest close since November 2020, according to FactSet data.
Since Coinbase shares started trading on April 14, 2021, the correlation coefficient between the stock and bitcoin has been 0.91, according to a MarketWatch calculation of FactSet data. A reading of 1.00 would imply they are perfectly matched.
Coinbase stock has slumped 49.5% over the past three months, while bitcoin has dropped 24.6% and the S&P 500 index SPX, +0.56% has lost 7.7%.