Why Coinbase Stock Crashed on Monday

What happened

Shares of Coinbase Global (COIN 4.68%) crashed on Monday, falling as much as 10.7%. As of 11:02 a.m. ET, the stock was still down 8.7%. This continues the ongoing slump that has seen the stock plunge 77% so far this year.

The catalyst that sent the cryptocurrency trading specialist lower was a downgrade and decidedly bearish commentary from a Wall Street analyst.

So what

Goldman Sachs analyst Will Nance downgraded Coinbase stock to sell from neutral (hold) while simultaneously lowering the price target from $70 to $45, according to a report by TheFly. This suggests additional losses for investors of 28% compared to Friday's closing price. In light of the continued panic-selling in a wide range of cryptocurrencies, the analyst believes there are more challenges to come. 

Nance said that current trading volumes and crypto asset levels suggest "further degradation" of Coinbase's revenue, which he calculates will tumble 61% year over year in 2022, with a 73% decline in the back half of this year.

Earlier this month, Coinbase announced a significant restructuring, with plans to lay off 1,100 employees, or roughly 18% of its workforce -- but the analyst believes this is just the beginning. Nance noted that the cost-saving measures merely bring the company's head count back to Q1 levels, implying that further "substantial reductions" will still be needed.

Now what

It isn't just Wall Street sounding the alarm. CEO Brian Armstrong warned investors that things could get much worse before they get better. "A recession could lead to another crypto winter, and could last for an extended period," Armstrong said. "In past crypto winters, trading revenue (our largest revenue source) has declined significantly."

The current sell-off has been particularly brutal, leaving some market watchers to wonder when -- or even if -- the cryptocurrency market will bounce back. 

Given the continuing uncertainty and the red flags raised by both Wall Street and the company's CEO, investors might be wise to avoid Coinbase stock (at least for now).