The collapse of FTX is having a profound impact on Coinbase’s (COIN) business. The platform needs customer trust and low cryptocurrency volatility to thrive. FTX hurt the customer’s belief in crypto platforms. They worry that deposits on such exchanges have no protection.
Customers are right. Cold storage of crypto is a safe alternative. Unfortunately, physically storing Bitcoin is inconvenient. The owner suffers losses if losing the storage device.
Coinbase stock remains weak. Every attempt to rally in 2022 failed. For example, it staged a rally in March, recovering to over $200, before bottoming at below $50. In August, the stock surged to well over $100 only to trade down to around $60.
On Dec. 1, Coinbase’s prospects worsened when Apple (AAPL) forced it to stop NFT transfers on its iOS wallet app. Non-fungible tokens or NFTs risk losing value quickly. Apple’s reasons for moving are not necessarily altruistic. Coinbase wrote on Twitter that Apple wants to claim the 30% “gas fee” on NFT transactions.
Investors are facing increasing downside risks with Coinbase stock. Regulators could accelerate platform regulations by introducing more rules. This hurts Coinbase’s moat while helping traditional financial institutions. Should banks offer a safer crypto platform, Coinbase’s business would erode further.
