This Is Why Coinbase & Microstrategy Is Set To Face The Music

Jim Chanos, a renowned short seller, anticipated that Coinbase and MicroStrategy will see serious challenges this year.

Jim Chanos recently mentioned on a Corner podcast that he expects the shares of cryptocurrency exchanges to see severe pressure owing to decreased fee revenue.

Chanos further says, when compared to standard brokerages, Coinbase’s trading commission margins are too high. 

Due to increased competition in the market, he believes Coinbase’s 1.5% trading commission margins will likely decrease to 0.5%. Chanos acknowledged that in March he held a short position in the company.

MicroStrategy is a “high wire act,” according to Chanos, who notably shorted the Enron crash in 2001. Large-scale accounting fraud was made by the $74 billion Wall Street favorite. CEO Jeffrey Skilling and other high-profile executives were under imprisonment as a result of the affair. Chanos expects the stock to closely track Bitcoin values this year.

Coinbase Lost $430 Million

Coinbase’s most recent financial report implies Chanos’ claim has some merit. In the first quarter, Coinbase lost $430 million. In total transaction revenue, the company’s primary source of income, fell by more than 30% year over year.

The second quarter of Coinbase might be much worse, according to the company. The exchange just announced that employee hiring will fall for as of now, mostly a cost-cutting move.

Since its IPO in 2021, Coinbase’s stock has underperformed. Throughout the month of May, the stock hovered around record lows. At present it is trading at $78.10, just over it’s all time low.

Chanos believes that as Coinbase is losing money at a very vast speed right now, this is a corporation that will have to eliminate expenses faster than revenues. 

Bitcoin and MicroStrategy are interconnected.

MicroStrategy is heavily in connection with Bitcoin, according to Chanos, and the fundamental business “isn’t worth a whole lot.”

With 129,219 Bitcoin tokens on its balance sheet, MicroStrategy is one of the largest widely disclosed Bitcoin holders. Given that the company planned to acquire Bitcoin from 2021, assets value has plummeted this year.

The company reported a total operating loss of almost $1 billion on its investments since their purchase in its first-quarter profits.

In March, the company bought 4,167 tokens for an average price of $45,714 per Bitcoin. The investment has plunged 36% of its value, as of today, June 1