It’s not all logical: Investors are getting rid of Coinbase and Robinhood stocks, but why are they skyrocketing?

In the world of crypto, everything is highly unpredictable. Or devoid of any apparent logic. Take, for example, the history of Coinbase (NASDAQ: COIN) and Robinhood (NASDAQ: HOOD).

A (not) long time ago…

Robinhood is not at all a prominent forest robber helping the poor at the expense of the rich. It is a crypto broker that facilitates transactions and allows users to buy stocks and altcoins.

Things haven’t been great at Robinhood lately. At the beginning of August, the company announced the layoff of almost a quarter of its employees. The company’s cryptocurrency division was also fined $30 million by the New York City Department of Financial Services for alleged anti-money laundering and cybersecurity violations.

O’Shares ETFs chairman and prominent Shark Tank investor Kevin O’Leary sold Coinbase stock at a significant loss in a “brutal trade.” He said he decided to “pull out because of the war they are taking on with the regulator.” As a reminder, this is a story about insider trading by a former Coinbase employee. During the hearing, the regulator recognized eight cryptocurrencies as securities.

Kevin O’Leary also removed Robinhood from its securities portfolio. “I think these names are toxic waste until it’s resolved,” he said.

By the way, Goldman Sachs (one of the largest investment firms in the world) also thinks that Robinhood stock is dead money.

It’s all good for Robinhood and Coinbase

A Robinhood Markets Inc. chief executive later assured the current institutional shareholders would not sell the company. Robinhood shares rose nearly 12% on August 3, despite reporting quarterly losses and announcing a 23% of its staff layoff. Robinhood’s revenue fell 44% in the second quarter (ended June 30). The company’s stock, priced at $38 at its initial public offering in 2021, has lost more than 70% since it debuted on NASDAQ.

Yes. And then there’s the negativity from famous investors (we wrote above). And Robinhood’s business is still surprisingly good. How so?

Some experts praised Robinhood for its strict measures to reduce overall costs. This could boost its returns later this year and help restore confidence among investors.

Coinbase shares, for example, rose 10% thanks to support from meme traders and a cryptocurrency deal with BlackRock — the world’s largest asset manager, with more than $8 trillion under management. The COIN ticker was among the most mentioned names in Thursday’s Reddit WallStreetBets chat. Apparently, small investors helped skyrocket the price (as they had previously done with the GameStop NFT marketplace).

Coinbase stock has been falling lately. The shares jumped 20% on August 3. But it is still down nearly 70% this year. 

As of August 5, 2022, the share price was $88.90 at the close of trading. During the month, the price increased by 58.74%.

Robinhood Markets shares were at $10.88 at the close of trading (up 20.60% for the month).