Coinbase, Voyager Digital, Marathon Digital stocks have plummeted in 2022, far beyond declines of bitcoin and ether
The marked deviation comes as major cryptocurrency exchanges, including Coinbase, are prioritizing diversifying revenue streams away from trading fees

Though bitcoin, ether and other cryptocurrencies have dipped so far this year, digital asset stocks have seen even steeper — often record — declines.

What companies may do to combat losses — if they even can — remains to be seen.

Coinbase’s stock is down roughly 45% year to date. Voyager Digital is down about 65% in 2022, meanwhile, Galaxy Digital has slipped 29%.

Most crypto stocks have historically traded as a proxy for cryptoassets themselves — especially mining companies — calling into question the current lack of correlation, according to Lionel Rebibo, CEO of crypto index trading platform Trakx.

“As the cryptoassets experienced heavy outflows, so did crypto stocks,” Rebibo told Blockworks. “The move on the stocks was probably exacerbated by the fact that they were quite often grossly overvalued.”

Bitcoin traded around $42,200 at noon ET Thursday, according to data compiled by Blockworks — down roughly 12% since the start of the year. Ether has dropped 18% to about $3,100 over that span.

The steep price fluctuations have led to lower crypto trading volumes so far this year, according to Chris Allen, an analyst at Compass Point Research and Trading.

A pullback from retail investors — impacting companies that derive the bulk of their revenue from trading fees — has led to institutional de-leveraging, affecting Coinbase and Galaxy, Allen added.

Despite clearer regulatory guidance, including President Biden’s executive order mandating government agencies study digital assets, the industry expects no major changes anytime soon, he said.

Coinbase provides a proxy for the market

Cathie Wood, CEO and chief investment officer of ETF manager Ark Invest, said during the Exchange ETF Conference in Miami last week that the disconnect between digital asset company valuations and stocks has continued to widen at a rapid clip.

She pointed to Blockchain.com’s funding round last month that boosted its valuation to $14 billion, up nearly threefold from $5.2 billion last March. At the same time, Wood said, Coinbase plummeted 40% to all-time lows, adding that the drop “makes no sense.”

Coinbase declined to comment for this story, but executives at the company addressed its stock decline during a February earnings call. Chief Financial Officer Alesia Haas said then the stock had traded in tandem with digital assets.

“We honestly don’t truly understand this, as this correlation does not take into account the growth in our market share, the diversification of our business beyond investing and let alone the future potential of our business as we expand into new assets and new product streams,” Haas said at the time.

Though transaction revenue still accounts for the majority of the exchange’s revenue, the company generated more than $500 million in subscription and services revenue last year — a tenfold increase from 2020 — including $214 million during the fourth quarter, shortly after Coinbase launched its trading service that imposes transactions fees in exchange for a monthly payment.

Coinbase this week unveiled the beta of its NFT marketplace that resembles an Instagram-like social media platform.

“The messaging from companies is that there will be periods of high and low activity and that they are building for the long term,” Allen said. “[Coinbase] is investing heavily, which is why we expect them to operate at a loss this year and next.”

Voyager’s decline comes as the company reported estimated total first quarter revenue of roughly $100 million — down from $165 million the previous quarter. Its users grew from 3.2 million to 3.5 million in the first three months of the year, trailing analyst expectations.

Miners’ tie to crypto prices, tech stocks

Crypto miner equities have also dropped. Marathon Digital is down 38% since the beginning of the year, while Riot Blockchain dropped 40% over the same period.

Many investors peg Marathon Digital, which owns roughly 9,400 bitcoins, as a proxy for the price of the cryptocurrency, according to Charlie Schumacher, vice president of corporate communications.

“While we often do trade with bitcoin, we are also correlated with the Nasdaq, which is down 15% year to date,” Schumacher told Blockworks. “If investors reallocate their portfolios and go ‘risk-off,’ they go risk-off across the board, and that impacts large bitcoin miners like us.”

Marathon is working to deploy 23.3 exahashes — a measure of power supply that impacts mining speed — of computing power by early next year.

Though the company is looking to launch a research lab and an incubator, Schumacher said bolstering its bread-and-butter of mining remains Marathon’s priority.

There’s skepticism among industry participants about miners’ lofty growth targets, including Marathon’s goal to increase hash rage 500% in just over a year, he added — calling it “very much a prove-it to me moment for the industry.”

Overall, Rebibo said he doubts that crypto companies can do much in the short and medium terms to counter stock price falls when cryptoasset prices drop.

“When a company is clearly tagged in a certain sector, its stock will strongly reflect the fundamental drivers of this sector — whatever the company does to differentiate itself,” he said.

Spokespeople for Voyager and Galaxy declined to comment on stock price. A representative for Riot Blockchain did not return a request for comment.

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