What happened
Popular cryptocurrency exchange Coinbase Global (COIN 7.00%) has certainly felt the impact of where cryptocurrency prices have headed over the past 24 hours. As of 10 a.m. EST Tuesday, Coinbase stock was down 1.5% over yesterday's close. Earlier this morning, that drop was as steep as 4%.
Cryptocurrency prices have come down considerably over the past 24 hours. Many high-profile cryptocurrencies have witnessed double-digit declines as investors price in regulatory risks as well as shifting sentiment into the valuations of anything cryptocurrency-related today.
Given the outsize decline in crypto prices, some sort of sell-off could be expected with Coinbase stock. However, it appears this company is seeing continued interest following yesterday's announcement that Coinbase co-founder Fred Ersham would be launching a massive venture capital fund with partners.
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So what
Capital flows into the cryptocurrency sector are among the key drivers investors consider when thinking about how quickly blockchain technology can develop. Those who believe a crypto/blockchain-dominated future is in store will certainly like this venture capital news.
However, for Coinbase, trading volumes continue to make up the lion's share of this company's revenue. Thus, sentiment in the broader cryptocurrency sector can impact this company's earnings dramatically. Any sort of loss of upward momentum could lead to trading volume declines, which factor directly into Coinbase's valuation.
As investors saw with Coinbase's recent earnings, there's some short-term risk to holding crypto-related stocks. However, the market currently appears to be siding with the view longer-term investors have that Coinbase is a company that requires a longer investment time horizon.
Now what
For now, investors appear to be taking the longer view with Coinbase. This is a company that has shown its business model can be profitable. And while last quarter didn't play out as many investors hoped, expectations are that this quarter could be better. The resurgence of meme stocks and investor interest in this space has made it so.
That said, today's significant dip in cryptocurrency prices could potentially turn into something more devious. For now, investors in Coinbase appear to be taking a wait-and-see approach.
