Coinbase listing was expected to bring more validation to the crypto market but recent events in China show the opposite effect.
Coinbase Global Inc (NASDAQ: COIN) stock closed Friday trading at $229.29, down 0.59%. Meanwhile, COIN stock was trading at around $220.13, 3.99% down at the time of writing. The deep in Coinbase stock is attributed to the recent intense crackdown of crypto mining areas in China that contributed to a crypto market dip on Monday.
Notably, the Chinese crypto crackdown has affected the four largest crypto mining regions in China namely: Inner Mongolia, Xinjian, Yunnan, and Sichuan. Massive mining in these regions among others made China the biggest producer of Bitcoin, accounting for 65% of the total global production as of last year.
The latest crackdown took place Friday after authorities in Sichuan’s southwest province ordered the closure of crypto mining projects by Sunday. China’s government also issued directives to Sichuan’s electricity companies to shut down electricity supply to areas suspected of crypto mining.
Notably, Sichuan province was the second-largest Bitcoin producer in China, with many miners taking advantage of its high-profile hydropower resources, especially during rainy seasons.
Nevertheless, the crackdown seems more broad-based since both renewable and non-renewable bitcoin mining techniques have been targeted. Inner Mongolia and Xinjiang, for instance, mostly used coal whereas Yunnan and Sichuan miners mostly utilized hydropower.
Coinbase (COIN) Stock and China Crypto Mining Crackdown
Coinbase stock is now about 45% down from its post-IPO highs. In mid-April, the company launched on the NASDAQ via direct listing with an opening price of $250 per share. On the first day of trading, COIN stock shot up 72% to 429.54 before closing at $328.28, up 31.3% with an $87.3 billion valuation.
Additionally, Q1 results showed a slight miss in Wall Street’s estimates. The crypto exchange reported an EPS of $3.05 contrary to analysts’ $3.07 EPS prediction. However, earnings and sales soared 2350% and 845% respectively year-over-year.
Overall, Coinbase 5-day and 1-month stock performance was -4.10% and 1.77% respectively. Currently, its market cap is 48.22 billion.
The stringent measures in China follow last month’s vow by the State Council to cut down on crypto mining and trading. Other than the high energy footprint created by mining methods such as that of Bitcoin, authorities claim the moves are necessary to mitigate financial risks.
Moreover, China increased its aggressiveness Monday when it summoned several banks and payment institutions, urging them to further crackdown on crypto trading. China’s third-largest lender by assets, the Agricultural Bank of China (AgBank), backed directives from the People’s Bank of China to root out any illicit activities involving crypto mining and transactions.
Coinbase listing was expected to bring more validation to the crypto market but recent events in China show the opposite effect. The rules have also deepened cryptocurrency prices, with Bitcoin and Ethereum dropping 10% and 12% respectively.