Legendary short-seller Jim Chanos has warned that MicroStrategy and Coinbase will be weaker this year. The veteran is confident that the two entities will have a rough period in 2022 following unsustained trading practices.
According to Chanos, the high margins Coinbase gets from commissions cannot be explained compared to traditional financial brokerages. He further added that Coinbase’s 1.5% commission margin would drop to 0.5% as competition increases.
Speaking of MicroStrategy, Chanos describes the firm as a “high wire act” and predicts that MicroStrategy’s stock will follow Bitcoin’s price pattern.
Is Coinbase Bleeding?
According to the recent report on cryptocurrency exchange earnings, Chanos has a point about the market direction of Coinbase. To set the record clear, Coinbase recorded a $430 million loss in Q1 of 2022.
Additionally, Coinbase’s biggest revenue source, total transaction volume earnings, has dropped by more than 30% in the past year. Moreover, the company warned that the year’s second quarter might turn out worse.
To curb the dwindling market fortunes, the firm announced that it had halted its hiring process for the rest of this year. It also put in place cost-effective measures to keep it financially afloat.
Meanwhile, the share price for Coinbase has been poor since it was listed in 2021. The stock’s performance was too low for the rest of May and currently stands at $78.10-, which is a bit above the lowest level.
Chanos maintained that Coinbase is a company that will cut costs more than revenue because the firm is bleeding. Coinbase is losing money at a steady rate, according to the legendary short seller.
MicroStrategy Likened to Bitcoin
Chanos also revealed that MicroStrategy’s performance correlates with Bitcoin’s, and the company is worth a little. For emphasis, Bitcoin value is currently below the average price predicted by Michael Saylor. Meanwhile, it will be interesting to see how the comparison pans out.
MicroStrategy, according to reports, is the largest holder of Bitcoin, with close to 129,219 tokens in its crypto portfolio. It is worth noting that the company was on a buying spree of Bitcoin last year. As the value of Bitcoin declined, so did the value of MicroStrategy’s holdings.
In its Q1 earnings, MicroStrategy logged a massive loss of more than $1 billion on its BTC holdings since the first purchase of the tokens. Moreover, the firm has been bleeding as the crypto market plunges alongside the value of Bitcoin.
The price of Bitcoin is currently in a bearish period alongside the broader crypto market, caused by the collapse of the Terra network. The crypto market has struggled to recover from the latest slump.
However, MicroStrategy’s accumulation of Bitcoin holdings is seen as the reason for its underperformance last year. However, a market recovery for Bitcoin could trigger a resurgence in the company’s earnings.
MicroStrategy bought 4,167 BTC coins in March at an average price of $45,714 per token. It has shed 36% of that investment as of June 1, 2022.