Citron Advises Investors to Short Coinbase (COIN) Stock

Coinbase has had a great run recently, topped off with a great Q4 2023 roundup in which the platform announced that it had beaten analyst predictions and was well on track to recovery from crypto winter.

However, a technical glitch – which was reportedly caused by high traffic – recently struck the exchange, causing the site to display some users’ balances as zero.

Speedy Recovery

The platform has since recovered from the glitch, and Coinbase CEO Brian Armstrong hopped on X to explain what had happened.

Apps are now recovering.

We had modeled a ~10x surge in traffic and load tested it. This exceeded that number.

It’s expensive to keep services over-provisioned, but we’ll need to keep working on auto-scaling solutions, and killing any remaining bottlenecks. Thank you for… https://t.co/JXVppV57AF

— Brian Armstrong 🛡️ (@brian_armstrong) February 28, 2024

Currently, all Coinbase functions appear to be up and running, save for PlayDapp (PLA) transfers.

Although the glitch was ultimately harmless, with the only damage done to users being a possibly major temporary shock when they saw their balance reduced to zero, certain longtime financial firms did not take kindly to the news – chief among them being Citron Research.

Short COIN, Long BTC

Citron Research is an independent financial research firm that has been “representing the other side of Wall Street for 20 years” founded by Andrew Left – a prominent bearish investor.

In spite of Left’s reputation and overall success, his firm has had some misfires in the past, such as calling for a short on Ethereum following the downfall of FTX.

Following the Coinbase outage, Citron has now called on investors to short Coinbase’s stock. However, the financial research institution also advised investors to hold their long positions on Bitcoin.

The recent $COIN site malfunction makes the long Bitcoin/Short Coinbase trade one of the most compelling trades in the crypto market. This means going LONG bitcoin through an ETF and short the bloated Coinbase exchange.

— Citron Research (@CitronResearch) February 28, 2024

Although COIN has indeed dipped slightly over the past few days, according to MarketWatch, Coinbase’s ticker seems to have stabilized since. It remains to be seen whether Citron’s prediction regarding Coinbase’s performance relative to Bitcoin proves true.

Other investors also commented on the recent buzz around Bitcoin, the price of which spiked above $63K yesterday. Currently, BTC is trading at $62K, according to CoinMarketCap.

“Interest in the sector is back. There was always going to be a bit of a sell-the-news aspect to the Bitcoin ETF, it got hyped so much, but hiding within the hype was something very real, and that was an institutionalization of the market and certainly the regulator kind of legitimizing the space,” stated Will Rhind, CEO of Graniteshare Advisors LLC.

With Bitcoin recently re-approaching its ATH of $69K, it’s safe to say investor sentiment will probably favor the BTC ETFs launched by multiple financial institutions. As the go-to source for crypto acquisition by large institutions, Coinbase will likely reap a significant part of the rewards.