One of the experts and legends of short selling, Jim Chanos warns about leading crypto exchange Coinbase being overvalued
Coinbase has made its name as a leading cryptocurrency trading and derivative exchange platform quite soon. For the company launched in 2012, despite having no permanent headquarter and most of its working team is remote, the asset under management worth more than $56 billion is impressive. However, Coinbase is recently blamed to be tremendously overvalued looking at its current level and this was said by short-selling legend Jim Chanos.
Chanos predicted that a collapse in its fee income will result in the plunging of Coinbase’s stock price. While in a podcast, he told that Coinbase still boasted itself as a crypto exchange with overly favorable commissions from retail trading, and the short position that Chanos has taken is based on the feasting that it enjoyed relative to mature brokers is up to an end.
Chanos said that Coinbase was not crypto prices call rather it was a call on the thought of a supportive business model. He also expects that fees of Coinbase to compress their levels at present as competition from its contenders that including Binance, Gemini, Kraken, and FTX. The Wall Street veteran had made his name successfully against popular corporate frauds like Enron.
Short Selling legend also estimates that it charges 150 basis points on trading volume which is down as low as 50 basis points potentially which is already down from its significant-high of 420 basic points that it collected at some point.
That means that Coinbase would need to cut its costs at a much faster pace than shrinking its revenue base. Regardless of the ongoing slump that crypto markets are experiencing, the company however actually hired staff recently in bulk. Almost one-fourth of its total 4,950 employees joined the firm in the first quarter of this year itself.
Currently, Coinbase forecasted its adjusted earnings before there was a swing of a $500 million loss because of interest, depreciation, taxes, and EBITDA. This is comparable to a profit of the first quarter which is approximately $20 million and $4.1 billion in 2021.
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Source: https://www.thecoinrepublic.com/2022/06/01/why-does-jim-chanos-think-that-coinbase-is-extremely-overvalued/