Shannon Stapleton/Reuters
Coinbase slid to a record low Friday morning, extending losses for a fifth day in a row amid a plunge in bitcoin's price.
The cryptocurrency exchange fell 3.87% to as low as $282.07, about a 14% drop from the price on the close of its first day of trading on public markets last week.
Meanwhile, Bitcoin slid below $50,000 on Friday, and simultaneous drops in other digital currencies erased $260 billion off the total value of the cryptocurrency market.
Coinbase's stock is heavily tied to bitcoin's price and a "perfect storm" of recent news is likely dragging down both the cryptocurrency and the exchange, said Dan Dolev, Mizuho Securities Senior Analyst, FinTech Equity Research.
The analyst noted that President Biden's plan for the US to achieve net-zero emissions in the next few decades is likely weighing on bitcoin's price given the environmental concerns with mining the coin. And, more countries are tightening regulation, including Turkey's central bank, which is banning the use of cryptocurrencies.
Dolev and Mizuho Associate Ryan Coyne initiated coverage of Coinbase on Wednesday with a price target of $285 and a "neutral rating."
Dolev told Insider Friday morning that he didn't anticipate the stock to slide near his price target so quickly. When he initiated coverage on Wednesday, Coinbase was hovering around $320 a share.
Over 80% of Coinbase's total revenue is reliant on retail transaction fees, and that could pose a risk for Coinbase down the road if other competitors like PayPal and Cash App, whose profits rely less on transaction fees, move to zero-commission trading, Dolev and Coyne said in their Coinbase note.
The analysts conducted a survey of nearly 400 individuals that use either Cash App, Venmo, PayPal, Coinbase, Robinhood, or Chime or some combination of these services in November 2020. The survey found that 55% of Bitcoin traders across Coinbase, PayPal, and Cash App consider low transaction fees as the second most important quality of crypto trading app platforms, right behind security.
In a phone call with Insider Friday morning, Dolev said: "They've done a great job, but that reliance on the retail trading fee is a real concern because we know how it ended when it comes to equity commissions."
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