COIN Stock Dropped 9% After Outage and CME Threat, What Next as Bitcoin Above $66,000?

Key Takeaways

• Coinbase experienced a system-wide outage on May 13 that impacted its platform users.
• CME’s intention to enter spot Bitcoin trading hit COIN shares once again.
• COIN stock can maintain a positive outlook with BTC trading above $66K.

Coinbase, a Nasdaq-listed crypto exchange, faced a series of service disruptions, culminating in a system-wide outage on May 13. While the disruption was resolved within hours, COIN took a hit in the daily timeframe. 

On May 16, reports emerged that the Chicago Mercantile Exchange (CME) plans to offer spot bitcoin trading due to rising demand. The events caused a 9% drop in COIN stock price on May 17. Despite this, analysts have maintained a positive outlook on Coinbase, and with Bitcoin’s price above $66K, the near-term outlook for Coinbase is not all pessimistic. 

CME to Enter Bitcoin Trading?

Chicago Mercantile Exchange (CME) could offer spot bitcoin trading on the back of growing demand, reported the Financial Times on May 16. The report notes that the CME has been talking with traders who want a regulated marketplace to buy and sell cryptocurrency.

Although the plan isn’t final yet, the move brings Wall Street into the digital assets market. Now that the US Securities and Exchange Commission allows stock market funds to directly invest in bitcoin, CME’s spot trading integration would bring more investors into the market.

In the past, CME competed to become the world’s largest bitcoin futures market and reportedly surpassed Binance. The development has hit COIN shares as it increases competition for the Nasdaq-listed exchange.

The Coinbase Incident Explained

Days before CME report around BTC trading emerged, Coinbase  informed users that its platform is experiencing a system-wide outage.

Coinbase has been dealing with a series of service disruptions starting on May 13, 2024. The exchange noted, “We are aware that some users may experience failures when sending crypto or withdrawing fiat.”

Initially identifying transaction failures at 20:22 PDT, the issues escalated into a system-wide outage reported at 21:19 PDT. Despite some services beginning to recover by 23:40 PDT, customers continued experiencing connectivity issues. 

Throughout this period, Coinbase has continuously assured users of the safety of their funds while investigating and attempting to resolve the disruptions. 

Interestingly, the outage at Coinbase was noted as scheduled maintenance on the website. However, some X users reported difficulties with selling and withdrawing their holdings. 

On May 10 as well, Coinbase encountered issues with retail login errors on their web platform. Prior to that in February, Coinbase experienced multiple incidents involving delays in transactions across various cryptocurrencies. It included MATIC, ETH, ERC-20 tokens, Avalanche C-Chain, VARA, OSMO, SOL, Arbitrum, and Polygon. 

While the incidents were later resolved ensuring normal service operations, the stock took a plunge.

COIN Takes a 9% Hit

CME’s intension to pose competition to Coinbase in spot Bitcoin trades and the recent outage has hit the Coinbase Global COIN stock price.  

On May 17, COIN was down around 9%.

The stock weakness occurred after CNBC  reported that Coinbase is considered investible despite its challenging public debut. Piper Sandler, an investment firm, remains bullish on Coinbase’s prospects.

Based on the report, analyst Rich Repetto began covering the stock with an overweight rating. Repetto emphasized that Coinbase is well-positioned in the cryptocurrency industry.

“As COIN continues to grow its assets on the platform and verified users count through (1) further adoption of crypto by the public and (2) increased market share, we believe Coinbase’s revenue potential has increased in optimal operating environments and raised their operating floor in subdued, non-volatile, markets,” Repetto added

At the time of writing, Bitcoin is trading above the crucial level of $66,000. Before BTC price recovery, a total of 16,021 Bitcoin were withdrawn from Coinbase on May 15 as per CryptoQuant. The large outflow signal that an unknown institution might have made a significant purchase, which is positive for both BTC and Coinbase.

COIN Strong Crypto Player 

Bitcoin outflow from Coinbase on May 15 suggests that institutional investors are purchasing Bitcoin, a positive sign for the cryptocurrency’s demand and price stability. This activity, coupled with CME’s potential entry into spot Bitcoin trading, highlights the increasing institutional interest in Bitcoin.

While Coinbase has faced service disruptions and a 9% drop in stock price following CME’s announcement, it is not all bad news for the exchange due to Bitcoin trading above $66,000. Since Piper Sandler’s Rich Repetto previously emphasized that Coinbase is well-positioned to grow its user base and assets, short-term challenges are likely but the long-term investment outlook may be strong.

Since the platform recovered from the outage within hours, it is unlikely to impact its investment outlook in the long run.