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Coinbase short sellers lose $2.2bn as Bitcoin ETF euphoria reaches fever pitch

Coinbase short sellers lose $2.2bn as Bitcoin ETF euphoria reaches fever pitch
Coinbase short sellers are down $210 million in the last 30 days alone, according to S3 Partners. Credit: SIPA/Shutterstock
WHAT YOU'LL LEARN
  • Coinbase’s latest earnings reports showed weak fundamentals, yet the stock continues to rise.
  • Coinbase short sellers are down $210 million in the last 30 days.
  • It’s unclear whether Bitcoin spot ETFs will prove beneficial to the company, or syphon customers away.

Coinbase short sellers have been taking it on the chin this year, and Friday was no different, as shares of the crypto exchange rose 2.7% despite the company reporting third quarter earnings late Thursday that Mizuho analysts said showed prevailing “weakness.”

Short sellers are down $210 million in the last 30 days alone, S3 Partners told DL News. The trading cohort has lost $2.2 billion this year as Coinbase shares have soared.

But bears are undeterred. Short interest as a percentage of float is almost at 13%, meaning that Coinbase is still popular with short sellers.

The exchange reported Thursday that its retail trading volumes slid to about $11 billion in the third quarter, while institutional volumes fell as well.

Meanwhile, the average rate of fees Coinbase generates from retail clients rose from 2.21% to about 2.5%.

“The underlying fundamentals continue at COIN to worsen,” Mizuho analysts said in a note to clients.

COIN is up 144% since the beginning of the year, according to Bloomberg.

Bitcoin was propelled to the $35,000 level in October on signs that the Securities and Exchange Commission might soon give the nod to spot Bitcoin exchange-traded funds — making the asset more accessible to all types of investors in the US.

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However, Bitcoin ETFs might not be good news for Coinbase and the revenue it makes from trading fees — especially since those fees “saved the day” in its latest earnings report, according to Mizuho.

“A Bitcoin [exchange-traded fund] would cost 0.01% to trade, and this goes for anyone regardless of size, on all major exchanges,” Eric Balchunas, Bloomberg Intelligence ETF analyst, wrote on X, formerly known as Twitter, this summer.

“Compare that to any crypto exchange, and you can see the potential here,” he added.

But John Todaro, an analyst at Needham, doesn’t think ETFs necessarily spell doom for the crypto exchange.

“There would need to be a lot of assets for the ETF custodial revenue to be material,” Toduro told DL News recently. “Main thing is it brings about more trading activity.”

Tom Carreras and Adam Morgan McCarthy are Markets Correspondents at DL News. Got a tip about Coinbase? Reach out to tcarreras@dlnews.com or adam@dlnews.com.

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