Short-selling Legend Jim Chanos Warns Coinbase is Tremendously Overvalued

Leading U.S. crypto exchange, Coinbase, is “tremendously overvalued” according to a warning from short-selling legend, Jim Chanos, via his appearance on Crypto Critics Corner podcast on Sunday. 

He believes that Coinbase is significantly overvalued because he predicts a decrease in fee income will send the stock plunging. As it stands, Coinbase does extremely well for itself given its favorable retail trading commissions. Right now they are charging 150 basis points on trade volume, but Chanos expects this number to decrease to 50 points. 

“Coinbase was not a call on crypto prices,” Chanos said in a podcast published on Sunday. “It was a call on what we thought was a sort of ancillary predatory business model.” 

The Wall Street veteran expects Coinbase to lower their current levels in order to compete against emerging competitors in the market like Binance, Kraken, Gemini and FTX. In short, this means that Coinbase will have to cut costs faster than the rate its revenue base shrinks. 

Chanos’ short puts him on the side of the bet from Cathie Wood, American investor and founder and CEO of Ark Invest, who recently acquired shares of Coinbase earlier this month after TerraUSD (UST) and LUNA collapsed. 

In order to diversify their income streams, Coinbase hopes to build out new businesses like its new non-fungible token platform called Coinbase NFT, currently in its beta form. In addition, they have expanded its staking to include Cardano’s native token ADA, which gives Coinbase a commission when holders stake their cryptocurrencies. 

Co-founder and CEO of Coinbase, Brian Amstrong, dismissed speculation of decreasing the fee for users earlier this month. 

“We tend to do our best work in down periods, so you know, ironically I’ve actually never been more bullish on where we are as a company,” Armstrong said in a Q1 earnings call. 

Author: Tyler Irvin

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