Summary: JPMorgan cut Coinbase’s rating from overweight to neutral and slashed its price target from $171 to $68 citing an extreme decline in cryptocurrency markets, according to a report Tuesday, covered by the Wall Street Journal.  In addition, Coinbase announced they will Lay Off 18% of their employees at around 1,100 people, according to a blog ...

JPMorgan cut Coinbase’s rating from overweight to neutral and slashed its price target from $171 to $68 citing an extreme decline in cryptocurrency markets, according to a report Tuesday, covered by the Wall Street Journal. 

In addition, Coinbase announced they will Lay Off 18% of their employees at around 1,100 people, according to a blog post Tuesday, authored by Brian Armstrong, founder and CEO at the cryptocurrency exchange. Coinbase also took to Twitter to publicize their announcement. 

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The CEO also took to Twitter himself to announce the devastating news in a series of three tweets

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The JPMorgan report noted that because a considerable amount of their revenue comes via the value of crypto token prices, the recent decline in the market will surely have a negative effect on their revenue, making it challenging for the exchange to generate a profit. 

JPMorgan estimates that trading volumes on Coinbase have decreased by more than 30% in the second quarter of this year, which follows a decline of 40% in the first quarter. They also noted that rival exchange FTX has passed Coinbase regarding crypto activity in May and is currently on pace to do so again in June. 

This JPMorgan report comes as Coinbase announced it would lay off 18% of its workers according to their CEO’s blog post. The CEO and founder cited several issues that eventually led to the decision: rapidly changing market conditions, managing costs and extreme growth followed by a bear market. 

Armstrong said in the blog post that he believes we are about to enter a recession after a 10+ year economic boom, and must scale down to accommodate this possibility. 

“While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment,” Armstrong said. 

As far as the company growing too quickly, Armstrong explained that the company saw opportunities in early 2021, but didn’t quite have the size to match. They tried to scale at an appropriate rate, but admitted they failed in that aspect. 

As a result of the recent news, Coinbase shares have fallen by 3.69% on the day, putting the stock at $49.71. Since its inception in April 2021, COIN has lost $291 from its starting price of $342, equalling an 85% decrease. 

Author: Tyler Irvin