Goldman Sachs downgraded Coinbase, saying it needed to lower its cost base

Analysts at the multinational investment bank and financial services company Goldman Sachs Group Inc. downgraded Coinbase Global Inc. in an investor report Coinbase shares to date have fallen 83.68 % from an all-time high in November 2021. Goldman analyst William Nance said his group of market strategists believed that "Coinbase will need to significantly reduce its cost base."

Goldman lowered Coinbase's rating

Coinbase shares have suffered during the bear market, and with them other shares of crypto companies have lost considerable value over the past few months. When Coinbase first listed on April 14, 2021, the company's stock was listed on the Nasdaq through direct listing under the COIN ticker. At the time, the reference price for Coinbase's initial public offering (IPO) was set at $ 250, and investors saw the quotation of the cryptobourse as a turning point.

After the shares were listed 14 months ago, ATH reached $ 342.98 per share on November 12, 2021. Two days earlier, Bitcoin (BTC) reached its current high of $ 69,000 per coin. BTC lost 70 % over the next eight months and COIN has since lost 83.68 %. In a report published by Bloomberg on Monday, analysts at Goldman Sachs lowered COIN's share rating from "neutral" to "sell".

In a note to investors, William Nance, chief investment analyst for the payments and digital assets sector, made a downgrade statement. "We believe that Coinbase will need to significantly reduce its cost base to stop the resulting burning of cash as retail business activity dwindles."

Bonds under pressure, Coinbase "faces difficult choice"

In addition, Subrat Patnaik and Matt Turner of Bloomberg said that stock investors are not the only ones in which negativism is booming. "The company's bonds have also come under pressure, with its unsecured bonds maturing in 2031 experiencing the largest decline in the US high-yield market," they wrote. Nance added that the cryptocurrency exchange will face some difficult decisions in the future.

"Coinbase faces a difficult choice between fragmenting shareholders and significantly reducing employee compensation, which could affect talent retention."

The downgrade of Goldman follows the company's dismissal of 18 % employees and the cancellation of a product for professional traders, Coinbase Pro. The banking giant also lowered its target price from $ 70 to $ 45 because it believes more problems will come and the volume of cryptocurrencies traded is causing further revenue degradation.

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