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The stock of crypto exchange Coinbase recorded its strongest month in history in January, despite the implosion of its former competitor FTX in November which shook investor confidence in digital currency markets.
Coinbase shares logged a 74% gain year-to-date, and are up 84% from the all-time low of $31.55 on Jan.6, according to FactSet data. In comparison, the Dow Jones Industrial Average rose 2.8% so far in 2023, and the tech-heavy Nasdaq Composite has gained 10.7% over the same period.
The rally comes after a rough year for Coinbase in 2022, as crypto prices suffered from a prolonged bear market, with the bankruptcy of FTX sending bitcoin to a two-year low in November.
Bitcoin has seen a comeback this year though, with a 38% gain so far, according to CoinDesk data. Technology stocks have also recovered some ground in January, as risk appetite returns on signs of cooling U.S. inflation and hopes that the Federal Reserve would bring an end to its interest rate rises.
Earlier this month, Coinbase said it would be reducing operating expenses by 25% for the quarter ending March, through measures including cutting 950 people, or 20% of its employees, after it eliminated 1,100 positions last June.
"It's a pretty big, sizable, meaningful cut in expenses, which helps it stay if not profitable, sort of close to a break-even through the tough times in crypto," noted Chris Brendler, managing director at D.A.Davidson.
Meanwhile, some analysts expect Coinbase to benefit from the fall of FTX, as the former saw its market share increase to 39% in early December from 34% in November, according to CryptoCompare.
"It should not be surprising that COIN would see an increase in market share among crypto exchanges during a period of heightened uncertainty," analysts at BTIG wrote in a recent note. The exchange has sought to position itself as a safe haven through emphasis on customer assets protection and regulatory compliance, the analysts said.
Read: Coinbase stock leaps more than 15% as analysts say it can benefit from FTX's demise
Still, analysts at Mizuho noted in a recent survey that despite bitcoin's rally, retail investors continue to stay away from crypto and retail trading accounted for 83% of Coinbase's total revenue in 2021.
For the rest of the year, it is important to watch if retail traders return to the crypto market, and if Coinbase can successfully diversify its sources of revenues, such as providing staking services for ether noted Davidson's Brendler. Government regulation may also have a major impact on crypto exchanges this year, Brendler noted.