Among the cryptocurrency platforms, Coinbase (COIN) is the best option for speculators. The company followed all regulatory requirements before launching new products and services. It has a regular dialogue with regulators to be sure that its offering will not run against upcoming rules.
On March 18, legendary short-seller Jim Chanos said on CNBC that Coinbase is “what we would call one of the bubble stocks.” He also disclosed a short position on Futu Holdings (FUTU), a trading app predominantly with Hong Kong users.
Chanos is justifiably skeptical of Coinbase’s large market cap. The company is effectively a platform with almost no moat. It differentiates its offering by posting quality information about various cryptocurrencies. It has training videos to educate the public. Chanos needs to bet that customers will consume the free content but then sign up elsewhere.
The short bet against COIN stock will work if the company’s expenses grow too fast. Look out for Coinbase spending too much to acquire customers. The more bonuses and promotions it rewards customers, the higher the losses. Furthermore, Bitcoin and Ethereum volatility may fall sharply. This would hurt cryptocurrency trading volume.
Coinbase could end the year with slowing revenue growth and higher expenses. It cannot afford to lose customers it spent heavily on to acquire.
