COIN

Publicly traded companies mentioned herein: Coinbase Global Inc (COIN), Galaxy Digital Holdings Ltd (GLXY)

Highlights

The presenter is short shares of Coinbase Global Inc (COIN), the largest publicly traded cryptocurrency exchange in the US. The presenter's thesis draws not only on the weak environment for cryptocurrency prices due to irresponsible behavior across the sector, but also strong headwinds for both the funding and DeFi markets that this exchange relies on for liquidity. The company faces tremendous pressure in meeting its financial and accounting goals for 2022, and the presenter models it missing on a number of metrics including transaction volume, top line growth, and FCF. Furthermore, as COIN fails to account for over a billion dollars worth of cash on its balance sheet that is tied up in the losses of other financial institutions and venues that it loaned the money to, it will struggle to pay its $1B operating expense this quarter, on top of an incoming $1.7B stock-based compensation expense as employees convert their options into cash due to the decline in the stock. With run rate transaction volumes down significantly QoQ, popular DeFi protocol tokens such as Terra (LUNA) collapsing in value by as much as 90% YTD, and huge impairments at prime brokers like GLXY and private equity groups (3 Arrows Capital, Celsius Network, etc.), the presenter anticipates COIN’s stock price falling by 50%.