Jim Chanos, a veteran short-seller, warned that Coinbase and MicroStrategy will likely see further declines this year.
Chanos said in an interview with the Crypto Critic’s Corner podcast that Coinbase’s earnings on trading commission are too high when compared to traditional brokerages.
He believes that Coinbase’s 1.5% trading commission margins will likely drop to 0.5% due to increased competition in the space. Chanos stated that he had taken a short position in the company in March.
Chanos, who famously shorted the Enron collapse in 2001, said MicroStrategy is a “high-wire act,” and expects the stock to follow Bitcoin prices this year.
Coinbase likely to be losing money
According to the crypto exchange’s most recent financial report, Chanos’ claim has some merit. Coinbase logged a $430 million loss in the first quarter. Total transaction revenue- the company’s biggest source of revenue, fell by more than 30% from last year.
Coinbase warned its second-quarter may be much worse. The exchange recently announced that it will reduce recruiting for the rest of the year to save costs.
Coinbase’s shares have performed poorly since its listing in 2021. Through most of May, the stock hovered near record lows and is now trading at $78.10, just above a lifetime low.
This is a company that is going to have to cut costs faster than revenues because they’re losing money at a reasonably prodigious rate right now.
Is MicroStrategy correlated to Bitcoin?
Chanos warned that MicroStrategy is largely correlated with Bitcoin and that core business, is “not worth a whole lot.”
Bitcoin is now below (Michael Saylor’s) average cost… that’s going to be an interesting exercise to see how it plays out.
MicroStrategy is the largest publicly listed Bitcoin holder with a balance sheet of around 129,219 tokens. The firm’s holdings have fallen drastically this year, even though it was buying Bitcoin until 2021.
The company reported a cumulative impairment loss of more than $1 billion on its holdings in its first-quarter profits.
In March, the company purchased 4,167 tokens at an average price of $45,714 per Bitcoin. It had lost 36% of that investment as of June 1.