Why the Bitcoin and Ethereum selloff is actually good for Coinbase

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Coinbase hasn’t had the best public-market debut so far.

Since the massive cryptocurrency exchange went public via a direct listing in mid-April, its stock has fallen nearly 32% from its first closing price, as the value of the big cryptocurrencies it depends on, including Bitcoin, has tumbled in recent days and weeks. That crypto pain was especially bad on Wednesday, as Bitcoin, Ethereum, and even Dogecoin plunged in a big rout before regaining ground later on in the day.

As for [hotlink]Coinbase[/hotlink], the stock closed down roughly 6% for the day on Wednesday. The exchange’s stock price is somewhat tied to the volatility of cryptocurrencies, and analyst Gil Luria of D.A. Davidson notes that “so far, Coinbase has traded almost in line with Bitcoin.”

But perhaps surprisingly to those watching Coinbase’s red stock chart this week, Luria tells Fortune that the falling price “misses a very important point, which is, today may have been Coinbase’s best day ever.”

His reasoning is that “the level of volatility is what really drives results for Coinbase—people buying and selling Bitcoin… not Bitcoin going up or down. I think people may have missed that today and that’s why Coinbase continues to trade in sympathy with Bitcoin, as opposed to in-line with the volatility of crypto, which is far more important to Coinbase’s results,” he says.

Indeed, the vast majority of Coinbase’s revenues come from transaction fees. So, as with traditional stock and securities brokerages, when trading volumes are up, that bodes well for Coinbase’s bread and butter—even if coins like Ethereum and Bitcoin are plummeting in price. Coinbase recently reported sturdy first quarter earnings (fairly in line with their preliminary results), and the company said it’s expecting volumes to be as good or better in the second quarter.

Still, falling prices aren’t the only issue Coinbase is wrestling with. Amid all the crypto craziness on Wednesday, Coinbase (and other exchanges like Binance) experienced issues with trading or logging in, as Coinbase Support tweeted earlier Wednesday. The company later declared it had “put a fix in place,” stating that customers “shouldn’t run into any more trouble logging into Coinbase and Coinbase Pro.”

Luria notes that “long term,” Coinbase’s value will be tied to the “overall success of the crypto economy, which is tied to crypto prices.” He says that investors should bear in mind that Coinbase’s stock follows the same guidelines as crypto assets themselves: namely that it’s a “highly speculative endeavor and investors should only invest what they’re willing to lose.”

But if investors see more rocky and volatile days like Wednesday, says the bullish Luria, “Coinbase is going to do phenomenally well”—so long as there continues to be the interest and active trading around the buzzy assets.

This story was originally featured on Fortune.com

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