US fund manager says Coinbase is a “bubble stock”

Coinbase underwent a direct listing in April last year. Coinbase is a leading US exchange, and it became the first major cryptocurrency exchange to be listed on NASDAQ. When the stock was floated, it attracted major investments across the crypto and traditional financial sector.

However, the stock has dipped significantly in prices since its launch. In less than six months, this stock has dipped by around 50%, and it is now seeming less attractive to fund managers based in the US.

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US fund manager shorts Coinbase stocks

The president and founder of Kynikos Associates, Jim Chanos, has stated that the Coinbase stock is highly overpriced. Therefore, his investment firm based in New York has shorted this stock despite the 50% plunge that has already happened.

Chanos was speaking during an interview with CNBC where he said that Coinbase (COIN) was a “bubble stock.”  He further noted that the market was becoming very competitive for Coinbase and that the exchange needed to lower its fees to continue attracting a large user base. He also noted that the revenue base was around 3% to 4% of its custodian and customer assets.

He added,

There are plenty of companies that are in the new economy that have real growth, real cash flows, and real earnings, but there’s a lot that is just being sold on stories, and we would argue that Coinbase is one being sold on a story.

Coinbase stock reflects the broader market

Coinbase’s stock gives investors indirect exposure to the crypto market. The price movements of this stock have coincided with the performance of the broader cryptocurrency market. COIN tends to rise whenever there is a surge in the broader market prices, and when the crypto market dips, COIN’s stock dips.

In mid-November, Bitcoin surged to an all-time high of $69,000, and COIN surged to highs of $385. However, Bitcoin’s price has significantly plunged this year, and COIN has been on a notable fall. On March 18, the stock had dipped to $185 at market close.

Coinbase has also been expanding its business operations from just the crypto market, and it has moved towards non-fungible tokens (NFTs). It plans to launch Coinbase NFT soon, which will allow people to buy and sell NFTs.