Cloudflare is down 71% in that same period. Zoom is down 60%. Speculative pandemic tech darlings are no longer darlings and are being hammered across the board.
It's going to be a rough time for anyone who had high hopes for their equity compensation.
The phrase "irrational exuberance" is sprinkled throughout John Bogle's book, Don't Count On It. (At least I think I'm remembering that correctly. But some Google brought up Alan Greenspan as using the phrase a lot.)
If you don't recognize the name, he founded Vanguard and the first index fund.
If you look at P/E then the current "collapse" isn't nearly as worrisome and realize it's just the inevitable result of market self correction vs human emotion, market Always wins. I personally believe the massacre will be over in a couple or three weeks.
What’s the forward P/E? Nobody has any idea because their profits depend on so many fickle variables: crypto prices, crypto trader enthusiasm, and competing exchanges not entering a race to the bottom that would put pressure on their margins.
We can’t literally know anything about the future. But we have a much better idea of the possible range for AT&T’s 2023 earnings than Coinbase’s. (Not saying you should invest in AT&T either.)
Like half of NASDAQ has lost ~50%, a quarter have lost ~75% and 5% have lost ~90% of their value from their highs. Coinbase is not an outlier, basically everything growth and risk on is getting dragged out behind the shed right now.
It works if you live by yourself in a 1BR. To pay the mortgage on a family home you probably need to sell RSUs. It is also super risky to to buy a house you need RSUs to hold on to - exactly the kind of risk that is unreasonable if you have a family.
It's not impossible to afford a house in the Bay Area on just cash compensation, if you're a dual-finance/tech/legal/medical couple and both partners have risen to mid-levels in their organization. L6/E6 cash compensation is about $225K, two of them is $450K, figure 50% out for taxes/401k/benefits and you're taking home about $225K/year or about $18K/month. PITI for a $2.5M home (20% down) is about $14K, so you've got $4K/month to spend on everything else. That's just barely enough - it's like someone making $48K/year but having no housing expenses, which is tight but lots of people do it.
That's just totally disconnected from reality. The majority of Silicon Valley homeowners don't receive any equity compensation. You should walk around and talk to regular people sometime.
(The numbers may be different if you look solely at recent buyers in a certain limited set of neighborhoods.)
I do live in SV, not wealthy to start with, and rent my home. About half my comp is equity and it goes to paying down student loans, savings, and the like.
At current housing prices my rent is 1/3 of a mortgage payment. Buying in this market doesn’t make sense.
Cloudflare’s value, as a business, is in their crack team of amazing neteng talent.
All these employees could just leave if they wanted to. If you are a public company and your worth is so heavily dependent on talent, how do you mitigate that risk?
Is there a future for football player style contracts for engineers, where you are tied in to a team for N years, and with a requirement that another team has to pay big money for your contract if they want you to transfer?
> football player style contracts for engineers, where you are tied in to a team for N years, and with a requirement that another team has to pay big money for your contract if they want you to transfer?
i.e. golden handcuff equity grants with vesting schedules? Top performers in highly demanded areas can have some or all of their remaining equity bought out.
It definitely ties the value of the contract to the stock price. In a way the company is leveraging its stock - significant declines hurt talent retention, and significant gains help it.
That’s different. You are talking about doing a deal with the player.
I’m talking about Company X having to pay off Cloudflare-the-business if they want Team Cloudflare’s top network engineer to transfer to Team Company X, mid contract.
That only really works in professional sports because each team is part of a league which enforces operating rules, including rules about player contracts and trades. No such "league" exists in the tech industry, and any attempt to form one would likely be a criminal violation of antitrust laws.
There are only about 1700 NFL players total at any given time. Most of those guys have amazing natural talent, honed by 10+ years of intense training that would crush most of us.
Network engineers are comparatively far more expendable and easily replaceable. It's not nearly as hard to learn as NFL level football.
Maybe. The best engineers are also naturally talented. It is a fact that to be a good engineer you need to be very smart. You can get by with just a CS degree and a Cisco certificate, but you won’t be a game changer.
How many Principle Engineers are there at the FAANGs? How important are they to the business, and how long did it take them to get to that level, in their careers?
Now add football (soccer), basketball, baseball, hockey, volleyball, and we're at probably tens-hundreds of thousands of professional athletes with multi-year contracts.
Same here. I bought their stock on several occasions, and a few times near the peak. I regret the timing, but not the decision to invest in this company.
Its surprising to see companies like CF being down. Like, they are the foundation on which apps and services are built. They are like the water supply, to the restaurant.
Is it a correction to true value or an over-reaction to market sentiment?
A little over a year ago, there was an incident with a lot of sites being down and Cloudflare/Lumen being involved (per Hacker News chatter, I only ready about the incident here). I bought a few shares of each, at around 39 and 11. While NET is down significantly from the peak, they have both worked out OK so far (LUMN has been paying $0.25 per quarter dividend). LUMN has been paying down debt and has good cashflow. They are contrasting and yet in a similar space.
> tech darlings are no longer darlings and are being hammered across the board.
Good, let it fall much more.
Coinbase was never a darling for anything but the out of touch uninitiated (marks) in the 'crypto markets' because only MTGOX was ever this incompetent and amazingly useless at what they do. Be it from canceled purchases, reversed transactions, inappropriately flagged, suspended, or canceled accounts etc... There history is one of perpetual incompetence with little to save them other than being backed by the tech oligarchs and VC.
Armstrong's appearance on the all in podcast just reminded me why their is so much distrust in this space as a result of people like him, all they wanted to do was virtue signal to one another about being a 'non-woke' worksplace. But they never addressed this very clear and glaring issue: the IPO was over-inflated and their relevance in this space is based on convenience of an ever smaller demographic. I wish they got to how and why they acquired 21, but that would require a level of transparency that I don't think he is capable of.
I hope Jack eats Armstrong's fucking lunch and just fights a war of attrition from his cut of the Twitter Buy out by Elon.
I don't think there is a place for Armstrong in this ecosystem since he sided with Ver and set us back for several years, but it's with absolute schadenfreude that I look at this YC backed unicorn go down in flames.
Just like how Altman turned out to be a conman pushing Worldcoin, Armstrong is of same SV insider ilk.
What that looks like maybe horrible since they hold so much BTC, despite supposedly being advocates of the BCASH fork during the Segwit/USAF wars.
I heard the podcast and honestly didn't see it like this. I saw Armstrong as a driven guy that puts business first. I don't think the "non-woke" communication was intentional, it was forced. The guy wanted the company to move forward and saw himself discussing other things that were not important for the future of the company.
Where I felt it was a but empty was on the part where he talked about the mission. I felt like he's trying to find a reason for them to exist when in fact their success until today is from retail investors pumping Crypto. I don't think there's much good in the world coming from their actions.
> I heard the podcast and honestly didn't see it like this.
Are you at all involved in the Fintech or Bitcoin ecosystem? This is a critical component of why I view him as such, his co-founder is ex Goldman Sachs. He is backed by the SV VC Powerhouses that these 3 supposedly lambast, but have had dealings with in the past (Sequoia et al).
> I saw Armstrong as a driven guy that puts business first. I don't think the "non-woke" communication was intentional, it was forced. The guy wanted the company to move forward and saw himself discussing other things that were not important for the future of the company.
That means his optics worked, likely only on the uninitiated to this space because this was extremely political in nature, again look back to the Segwit/USAF wars we went through. It's all there, Armstrong sided with a bunch of conmen for his own personal gain and still has one of the largest BTC holdings. This was the equivalent of insider trading on top of racketeering.
> Where I felt it was a but empty was on the part where he talked about the mission. I felt like he's trying to find a reason for them to exist when in fact their success until today is from retail investors pumping Crypto. I don't think there's much good in the world coming from their actions.
This is a matter of interpretation, and depending on what period you're talking about in Coinbase's history it can vastly differ: initially they were onboarding many more into something seemingly too arcane for the average retail customer to grasp after the collapse of MTGOX this was necessary as most exchanges operated on too far of the fringes. What they did was simplify this for the layman, who couldn't understand the initial complexity of the tech: you use to have to run your own node on QT before webwallets/mobile wallets were a thing. This was daunting for me when I began, too, but I unlike most became obsessed what this tech's possibility ever since and it began my career into tech.
I won't go into why Bitcoin has helped many more than the average affluent HN tech worker will ever grasp here, but in short their ability to onboard many into this ecosystem allowed for immense upward mobility for generations that have been only marginalized and relegated to poverty in even developed nations due to inflation and higher costs of living and stagnant, if not negative/declining wages relative to expenses.
Coinbase many lists alts, most of which are pump and dump schemes for sure, but the fact remains that even in this current down-turn if you DCA into BTC for several years prior to 2021 you'd still be looking at really nice returns.
I'M MAKING IT VERY CLEAR I WANT TO SEE THE DEMISE OF COINBASE!
I wont bore you with the tech side either, frankly I think it's not worth my time and you can look at my post history of you want more context about why that is, but the short of it is Armstrong represents a point in which VC and it's expand and moat to IPO and cash model was institutionalized in what was before fertile ground for experimentation trying to move away from this model--BTC-e still remained the most reliable exchange until it was seized by the Feds outside of it's jurisdiction.
I swear, we can write like 50 movies of just the last 13 years of BTC history, but all anyone wants to focus on is Silkroad.
maybe not yet, unless a super early company, since no one is worth the round they raised in the last 6mo, which is what determines the strike price you'll get today. You're either looking for a down round, or a company that hasn't gone up yet.
Or a public company that took it in the chin over the last 4 months. With public companies you get the market price at the first board meeting after hiring, and you don't take quite as much risk of your stock being totally worthless as you would with a down round or unknown company.
Google didn't acquire Snowflake - unless you know something the rest of the world doesn't ;-) But if they did, how would it be "an answer to MongoDB"? i.e. MongoDB Atlas. AFAIK, MongoDB is focused mostly on the operational database market, not the offline analytics market. Would love to understand that part - thanks!
I’m particularly sad to see Cloudflare’s stock having plummeted.
Out of all the tech companies that IPO’d in the past few years, Cloudflare is one that the most potential to excel long term. Developer sentiment towards Cloudflare is comparable to Apple fanboys of the previous decade, and their products are legitimately good, backed with tangible assets (datacenters). They also have consistent growth quarter over quarter.
It’s surprising how many not as impressive companies (pre-revenue!) got away with entering the public market last year. Good company or bad company, they all seem to be sharing the same freefall.
Worth recalling there are >5 rate hikes priced in for the remainder of the year, and that the problem with CloudFlare isn't just the speculation, but for their legitimate business, the credit fuelling many of their customers, which are significantly concentrated in the tech sector. The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. What built CloudFlare's excellent sales pipeline can just as easily obliterate it, but in any case will certainly leave at least a major dent.
It's probably a great time to be getting into finops, and I don't think CloudFlare's fair value is anywhere remotely near $18bn.
I think we'll discover before the end of this year just how many of the tech darlings were largely side effects of the poisonous sandbox constructed by the US fed.
Tightening of infrastructure budgets isn't often easy, you need to invest weeks of engineering time into a mere 6 figure yearly reduction in infra costs.
Aside from that, Cloudflare is growing revenue not just overall but also on a per-customer basis, due to the expansion of products.
Once Cloudflare releases products that allow it to more directly compete with AWS, it'll be repriced by investors. They've already stated that this is their goal. They're missing a compute product and a real database or KV store solution to be at the bare minimum. I think we'll see both, and at least one will happen in the near future.
Cutting infra costs is not easy, especially when the costs of lapsing security spend are so high (how much did Equifax lose on reputational damage + cleanup work?).
> I think we'll discover before the end of this year just how many of the tech darlings were largely side effects of the poisonous sandbox constructed by the US fed
?? Poisonous sandbox?
Is this an awkward way of referring to money printing? Or the low interest rate environment?
It's a bit awkward since "poisonous" usually refers to things you eat, and sandboxes or their contents are generally not eaten.
If you want to continue the sandbox metaphor, which I do like, "playing in the Fed's sandbox until the bottom fell out" might work. Or even "toxic sandbox".
I was thinking somewhere vaguely along the lines of easy credit as something like heroin addiction/withdrawal, that's where poison came from. I guess it is awkward
I liked it. Also because the markets have become decoupled from reality/fundamentals/value - like a sandbox - at this point. Also liquidity and fungibility of the money supply/sand =)
I quoted from Wiktionary, feel free to update the definition there (with sources) if you disagree. Note that the "Synonym: toxic" appears underneath the second (figurative) definition, and in my opinion is perfectly correct; in figurative use poisonous and toxic are used in the same way.
I think it works, toxins can transmit into the body not just through the ingestion route but also skin absorption among many other routes. So if there's toxins in the sand of the kind the skin is vulnerable to then that sandbox would be poisonous to the occupants.
https://www.cdc.gov/niosh/topics/skin/default.html#:~:text=D....
> If you want to continue the sandbox metaphor, which I do like, "playing in the Fed's sandbox until the bottom fell out" might work. Or even "toxic sandbox".
All toxic substances are poisonous. A toxin is a poison produced by a living cell or organism.
Poisonous Sandbox was elegantly simple, pithy even, and quite appropriate.
While "toxin" refers specifically to a poison produced by a living cell or organism, "toxic" does not -- it's a synonym of poisonous, directly derived from the Latin word for "poisonous".
"Toxin" is a newer invention, derived from "toxic" by adding the biochemistry-related suffix "-in" to indicate toxic substances of biological origin.
Seems notable that just today Uber's CEO sent a letter to everyone that said, among other things, that hiring is tightening. Just one firm, but a big well-known one.
Stock doing poorly -> public company CEOs want to please wall street by showing greater revenue -> layoff (employees are largest cost center for tech companies)
The purpose of interest rate hikes is to dampen demand. The less demand there is for goods and services, the less need there is for workers to provide them.
> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets.
But cloudflare is also pretty cheap for many things, so that may bring in some more money from people downsizing from something like akamai, could it not?
Are you saying 18bn is way too high or way too low when you say ' lI don't think CloudFlare's fair value is anywhere remotely near $18bn?'
I know it's down a lot but I'm asking because it started from such a loft valuation
I have no opinion on NET but a lot of the cloud bubble stocks of the last few years needed to come down by 95 percent IMO to get closer to intrinsic value. To do that they'd first drop 90 percent, then drop another 50 percent from that point. Hence I don't know which you meant.
Some more respectable commentators suggest the current environment is the start of a second tech bust, and although that seems sensational, it might be fair given current trends of shrinking credit, de-globalization, explosive inflation and rapidly collapsing discretionary spending seen at present.
A reasonable starting point might be where it was prior to Covid QE and rate reductions (-61%), add one company-specific shock due to missed growth expectations (-30%), maybe +20% for real growth experienced over Covid in the meantime, and that already leaves us with $6bn, before accounting for the effect of the fed beginning to unwind their balance sheet (which starts in June, initially at around 1% per month)
Incrementally buying at $18-$25 would definitely feel tempting in that scenario, assuming the fed delivered its claimed targets, and only with the understanding the IPO price should not be considered a floor.
This is all before considering the reality their product isn't much more than a commoditized fly on the windshield of bigger vendors, and it's easily possible to imagine a Lightsail-like competitor appearing in the meantime.
> Out of all the tech companies that IPO’d in the past few years, Cloudflare is one that the most potential to excel long term
If you think this, you should be happy and buy more of the stock. I don't know enough to say if I think it's a good idea, but if you do, don't be sad, buy more of it.
This all gets a bit messy when trying to use a simple binary designation of "good" or "bad" to describe a company based on all factors about that company.
Good companies come and go. Good companies of old no longer exist because the world changed. Some companies are good for awhile, and then lose their way. Nuance abounds.
Not putting words in the parent commenter's mouth, but maybe a different way to say this is that Cloudflare is a good product. A product can be both great, and not viable under some conditions. The two are not mutually exclusive.
It's interesting to look at the list of 11 companies profiled by Jim Collins in his classic 2001 business book "Good to Great". How many of them are still considered great today? In other words, is being great at one point of any value in predicting long-term success?
Again, they aren’t a good company today if they can’t weather a down turn. They may have been a good company in the past, but they aren’t currently if they can’t make it.
What's your definition of a good company? If people could reliably predict which companies are and will remain good then they will be very rich. Most of us can only know in hindsight for the most part. This is why virtually no one picking individual stocks beat the S&P 500 index over the long run.
This is basically what I was getting at. Everyone has different definitions of "good" and to limit it strictly to "Survives the current market" is both limited and asking for abuse. E.G. I would argue there is absolutely nothing "good" about US health insurance companies, but they continue to be financially successful.
My belief in their goodness, or lack thereof, has absolutely nothing to do with their finances. It is the same reason I won't invest in Crypto currencies or NFTs. The line may be going up but so is the global temp. Not good.
I both agree with you, and sympathise with GP because I'm bad at following your/my own advice.
I suppose it comes down to conflicting opinions/strategies - I'd be way over-allocated in Amazon & Cloudflare (and probably 'tech' and the USA) if I always did.
Yes and no. You might not have cash to spare (especially in such a volatile period). Also, investing more might exceed your exposure limit to a single stock/industry.
Sure you should have a diversified portfolio but everything is also on discount. Warren Buffet went on a buying spree. If you don't have cash to spare thinking about investing isn't what you should focus on but instead doing basic financial wellness like having a savings account. Also cash has been outperforming the market so far so cash isn't necessarily a bad investment.
>If you don't have cash to spare thinking about investing isn't what you should focus on but instead doing basic financial wellness like having a savings account.
There are an incredible number of reasons why they might not be able to invest right now so perhaps it isn't the best thing to immediately goto implying they don't even have a savings account.
I'm a NET watcher/holder, I've read most of their earnings call transcripts and SEC docs since the S-1. IMO, they were way overvalued at their peak on fundamentals. With the recent slide, I think they're "far" undervalued, to an extent that varies based on how much value one attributes to present and future tailwinds that cannot be encoded on a balance sheet as future receivables.
Boiling it down, I think institutional investors do not fundamentally understand Cloudflare's technical raison d'etre.
As you implied, NET gets lumped in with its IPO class of "tech stocks", but is fundamentally different, for the reasons you gave. They have a legitimate moat, differentiated technical talent, and are fishing in a growing pond.
Similar to the Amazon story, it seems inevitable that a company shaped like NET is going to make oodles of money in the next ten years provided they have the right leadership and capital structures. NET has all that, and a several-years head start. On and up.
This may be the wrong place to ask, but if a regular person wanted to buy stock in an individual company or two, and mostly hold it (not day-trade), what's the right channel for that?
Lots of online brokers will let you trade individual securities. The used to be more fees associated, but lots of places now allow zero-fee trading as well. ymmv
Try buying $1000 worth of any stock and immediately selling again. Notice how you now only have $980. You effectively paid a $20 fee. It was just a hidden fee in the spread caused by whoever executed your trades.
There are two prices, the bid price (how much someone is willing to pay) and an ask price (how much someone is willing to sell). When you submit a market order, you usually get a price close to the bid (if you’re selling) or the ask (if you’re buying).
The 20$ difference you describe is the spread - not a fee taken by the brokerage, market maker, exchange. Whoever is executing your trade isn’t pocketing the 20$.
Then just don't execute both trades... and everyone can quote on the current bid or the ask price, you should do it too if you're afraid of crossing the spread.
Is that misinformation or not? Don’t market makers make their profits by collecting some difference between bid and ask? I recall a video from Warren Buffett explaining that it was criminal that firms like Robinhood get away with calling it zero fee trading.
The consolidated bid and the ask across all exchanges make up what's called the NBBO and every one (market makers, exchanges, etc) are required to give you a price equal to or better than the NBBO. So if the bid for SHOP is say $50.00, the ask is $50.10, and you are selling SHOP, its illegal for anyone to give you a price < $50.
Market makers make money by buying low and selling high (and vice versa). They typically look for small movements not large ones. So if a market maker bought SHOP at $50, they would try to sell it at $50.10. This is what everyone means when they say a market maker makes money off the spread.
This strategy works really well when you have large random order flow, which is why market makers want to pay brokerages for order flow. They incentivize brokerages, even ones that charge commission) by giving pfof (payment for order flow) and price improvement on top of the NBBO. This price improvement is passed on directly to the customer.
IIRC, brokerages have a best execution obligation. So they are required to try and execute orders in a way that gets customers the best prices. I don't know about other brokerages but at Robinhood, pfof wouldn't go into our order routing decision at all. We would send orders to the market maker using a model which only considered the historical price improvement they gave our customers.
Because Robinhood order flow is so lucrative for marker makers in aggregate, they were willing to give us really good price improvement. So the execution for options and equity orders at Robinhood be better than other brokerages (even ones you pay commission for)
I’m the cofounder of https://olainvierte.com - we released our stock trading app just days ago. We focus on financial education and long term financial health for Latin America but anyone is welcome :)
Cloudflare doesn’t own anything significant in the form of data centers. Having small rented footprints at IXPs across the globe is not an asset, it’s just a cost. I’m not downplaying the difficulty of getting it setup but there is no intrinsic value in having it if demand for their product collapses.
> Developer sentiment towards Cloudflare is comparable to Apple fanboys of the previous decade
This is far from true. People begrudgingly pay protection money to cloudflare to protect themselves from DDoS attacks. Very few significant operations depend deeply on the cloudflare stack. It has not been the AWS alternative it set out to be with the launch of its lambda like edge compute products.
An AWS, Azure, or Google DDoS protection product could eat Cloudflare’s market in a hot minute. Cloudflare can’t escape being a “feature” of a cloud provider.
(Disclosure, I sold out of Cloudflare at the end of the year when it failed to gain significant traction.)
Cloudflare doesn’t own anything significant in the form of data centers. Having small rented footprints at IXPs across the globe is not an asset, it’s just a cost. I’m not downplaying the difficulty of getting it setup but there is no intrinsic value in having it if demand for their product collapses.
I don't understand this point. If there's a risk that demand will collapse isn't it better not to own the data centers? By renting CF can reduce their costs quickly in the face of falling demand. That's a feature.
An AWS, Azure, or Google DDoS protection product could eat Cloudflare’s market in a hot minute. Cloudflare can’t escape being a “feature” of a cloud provider.
This is also true of any other software company though - at some point a bigger company might offer whatever product as a feature. It's just a risk of building a software company - what we build is largely straightforward to copy. That doesn't mean there's no value in software as a product though.
> there's a risk that demand will collapse isn't it better not to own the data centers? By renting CF can reduce their costs quickly in the face of falling demand. That's a feature.
But it’s not an asset. Do you know what an asset is?
> Cloudflare doesn’t own anything significant in the form of data centers. Having small rented footprints at IXPs across the globe is not an asset, it’s just a cost.
Akamai is the leading global CDN provider, want to guess how many data centers they own? Sure, owning a data center is an asset, but it’s also a liability too.
When whole species get torn down in one solar year bc some other species began to adopt a winning adaptation, that seems prone to overshooting (excessive curve fitting to the first derivative), with odd/suboptimal outcomes as no surprise.
$212M quarterly revenue with a $41M loss. In this climate you better have a solid PE as a public company or you’re in deep shit. This is the second dot-com bust. I worked at eToys for the first. $6B market cap and was delisted. Assets sold off for $2M when liquidated. Make no mistake about how bad things are about to get.
I lived through the dotcom bust, the financial crisis and now this. Long term it isn’t going to be any worse than they were. In 2-3 years we will be recovering. I feel bad for people who can’t wait out a market cycle, but that’s what this is, somewhat exacerbated by the Fed’s actions leading up to this point.
I get your point that everything always goes up eventually, but there will be unpredictable events that reshape the market like COVID, war, 9/11, hurricanes, and many other “one-time” events that we can’t even predict right now. Just because these things kind of happened at different times doesn’t mean 10 of these things won’t happen all at the exact same time or back to back for many years. Imagine having a COVID lockdown, on top of a fuel shortage, and a food shortage, on top of a war, on top of countries defaulting on debt. If even any two of those happened in lockstep it would spell disaster for many company’s as we know. We got lucky there wasn’t another major crisis during COVID lockdowns although to this day we are dealing with the supply chain issues created with strict lockdowns and China is still or really just starting now to lock down in a major way, so now the supply chain issues we had aren’t just on our side of the ocean but theirs as well. It’s a miracle it didn’t happen on both sides at the same time.
I believe it was ~13 years before the nasdaq reached the same level as the peak of the dot com bubble. I also find it odd to use the peak as the primary reference point. It was a brief moment in time. For example, if you had invested in the nasdaq in Feb 99 or Nov 2001, instead of Nov 99, it recovered in 7 years. If you started in Aug 98 it recovered in ~5 years. There was rough a window of a year where it would have been really bad to invest, but that is why everyone recommends dollar-cost-averaging (https://www.investopedia.com/terms/d/dollarcostaveraging.asp) instead of investing a ton all at once.
Ya'll are talking past each other. Since I made the comment, I will define my terms more precisely. In 2-3 years someone who consistently invests a fixed portion of their earnings/assets into a weighted vehicle/basket will be enjoying an appreciating net worth. I'm not claiming to be able to call the bottom, but I'm also not measuring "recovering" as peak-to-peak. Peak to peak would be past-tense "recovered".
Has the “pace of technology” really picked up in the last 10 years though?
In 2012:
- Apple and Google were the dominant mobile platforms
- Microsoft was dominant on the desktop
- Amazon was the dominant retailer and the dominant (but nascent cloud provider)
- Google was the dominant search engine and YouTube was dominant
- Facebook was the dominant social network
-Microsoft has been one of the top five companies by market cap since 2000 and Apple has been in the top 5 since 2011.
- Intel is still the top PC processor manufacturer.
If you saw a modern smart phone in 2022, would you really be impressed with the iPhone 12 ProMax compared to the iPhone 5s?
I was using a 2 year old Core 2 Duo 2.66Ghz Dell with 8GB RAM, gigabit Ethernet and a 1920x1200 (not a typo) screen. That computer can still run the latest version of Office and Chrome today.
In other words, the landscape hasn’t changed that much.
Now compare 2012-2002.
Have there been any new widely successful tech companies emerging since Facebook in 2009?
Amazon. AWS was just a small cloud on the horizon in 2012. They are the dominant platform to run applications and (more surprisingly) now the #2 DBMS vendor according to recent Gartner numbers. That's a major change. [0]
I know nothing about NET other than the 30seconds I just spent looking at their financials - they managed to triple their revenue over three years but they seemed to have managed to about triple their losses over the same time period and they trade at ~30x sales, MSFT is ~11x, guess people believe they’ll be earning a ~$2b/year in the next several years?
That startup math worked out fine until a few months ago.
The common wisdom was tech companies can always fire personnel when they will want to become profitable and until then increasing expense to get more market share is the thing to do.
It's not completely baseless but obviously we now know too many companies rode this momentum and built businesses that might be unsustainable. We will see.
I'm looking to get positions in Crowdstrike, ZScaler, Snowflake and Palantir if I can find good entry points. All have been too high to justify for the past couple of years.
I've been in Cloudflare since about $30 and sold about 20-30% when it was at $200, so I figure I'm playing with house money there and have no plans to sell at any point. I would like to buy back though.
I bought at the peak for cloudflare and had a similar thought process.
After losing 15-20%, I decided to sell. Figured I'd buy again after it dropped further. Guessing when it's 80-90% down from peak I'll end up repurchasing.
It's quite entertaining that when electronics and clothes go on sale people go buy buy buy, but when stocks go on sale people sell like crazy. People are weird.
A plummeting stock won't prevent Cloudflare from excelling, unless they are short of capital and have an urgent need to issue a secondary stock offering.
They can buy Oxide Computer and become a truly back-to-1997 retro-futuristic cloud company. Hindsight is 20/20. In gradient descent optimization, sometimes it is important to take backwards steps to get out of the local optima. We're going to look at AWS/GCP/Azure with the way manner we currently look at IBM/Cisco/Oracle. I also have no idea what I am talking about.
As far as them going bankrupt seems pretty unlikely as some people are saying. Remember - Paypal, Yahoo, Google, etc. amongst many survived through the dot com bust. Cloudflare can generate positive cashflows anytime they want by stopping future development.
Technology and society has ways to build up layers of abstraction. It takes some realization, hindsight, genius and humbleness to cut down the overgrowth and pick the fruits, plant new seeds.
So did I, after calling it on their IPO prospectus at the time. [0] It was a good ride from <$20 and still is a good stock to buy even at these prices now.
But at one point [1] it was hyped very quickly and had to sell most of it at >$200 after asking and reading the responses from this [1] it was really not a surprise to see through the hype at the time and why it crashed so quickly. [1]
You can have similar sentiments towards a lot of the companies. For example zoom, twilio come to mind. Point is all of them across the board have been inflated.
This is endemic of the problem of the current tech ecosystem. Emphasizing “growth” over “profitability”. Why is it surprising that a company that has loss money over the past five quarters is seeing its stock tank?
Agree, Cloudflare is doing some great stuff and always trying new things. Remember the Cloudflare TV Channel (if that still is around). I hope the loss in market cap doesn't hurt their innovation.
Good joke, but knowing that foundations in permafrost don't "depend" on it but adapt and adjust to it (either through adjustable piers, gravel pads, or floor joists floating on insulation and gravel, etc)... definitely an /s
Except apartment buildings in Siberia really are collapsing, for exactly the reason noted. We and they might wish they had foundations that didn't depend on the ground staying frozen, but that is not what is there.
I was about to make a joke about nuclear teapots powering cryptominers with their excess heat, but then realised this might be a legit idea: nuclear waste, that nobody knows what to do with, could be used to power asics mining bitcoins.
Nuclear waste literally comes from power plants. If their residual heat could be used to generate electrical power, it would be done already.
It can be (and is, although not everywhere) used, for cogeneration - residual heat from any thermal plant used for district heating/industrial heating processes.
Nuclear waste also comes from plutonium production. And it could be used to generate power, but this leads to fuel reprocessing, which runs afoul of nonproliferation treaties, as it produces weapons-grade fissile material.
I did read about a more general idea where excess power plant capacity would be funneled into asic crypto mining. I think this makes a lot of sense if you are thinking about power sources that take a long time to ramp up. For these plants, I imagine it could be necessary to quickly bleed power to reduce capacity in order to balance the grid.
Could you elaborate further on this? I originally read your response as meaning something bad specifically based on the OP stating that they are Russian, and I am hoping that isn't actually the case.
Blockchain and Crypto are fairly useless in areas with reliable currency. The Ruble is a garbage currency and so, it's entirely feasible that the stated advantages/benefits of something like BTC really do add up in a place like Russia. But I'm not sure BTC is the solution, or that there are really any solutions as of yet.
As for 'meaning something bad' and not being sure about it, why would you even respond? It's just a discussion board. Nothing we say here is important, it's not worth a glancing though to contemplate if someone somewhere on a comment section may or may not have meant something ill mannered towards someone else.
And in all self awareness, I have no clue on earth why I am downvoted, usually in retrospect it's obvious, but when discussing 'Bitcoin' one can never really tell (not that it matters).
Ah, interesting! I usually only hear about crypto/blockchain in a negative context (new XYZ-coins that are pre-mined, environmental impact, plugged into games for new microtransactions, etc), so it's interesting to hear about a potentially legitimate use case.
To be bluntly honest, I responded because I thought you might be advocating for violence against someone entirely based on their nationality |OR| that I completely misunderstood what your comment was about (which I definitely did here; sorry for interpreting your message the wrong way).
Even with it just being a discussion board, I would really regret not at least leaving a comment asking for clarification. I'm glad I did in this case, as I turned out to be completely wrong :)
i don't see why anyone would want to buy coinbase stock. it's extremely correlated to the broader crypto market with less upside. In a bull market, you could buy bitcoin or maybe be a bit more risky and buy some of the higher tier alt-coins and it would probably give you a 1.00 correlation in bull and bear cycles, but during the bull cycles the coins would skyrocket because they are tied to any major fundamental metrics like balance sheets.
> i don't see why anyone would want to buy coinbase stock.
Because their growth trajectory is insane. They are making a ridiculous amount of money & will be around for a long time. The real question is how MUCH should you pay for the stock? It's worth something, but I haven't tried to value it & I have no idea what it's worth. More than zero, less than infinity.
> but I haven't tried to value it & I have no idea what it's worth. More than zero, less than infinity.
Thankfully a lot of people do know how to price the value of a stock. A good number to target is a P/E ratio of 30 for a tech stock in growth mode.
Tomorrow COIN releases their earnings report. EPS is expected to be 0.17% of the share price. So I would expect the blood bath to continue on COIN stock. If I had money available, I would buy put options tomorrow on COIN.
That's a really rough valuation heuristic that can lead you very far askew.
A P/E of 30 is appropriate for a value stock (steady earnings) at 3% interest rates. (How did I get that figure? P/E of 30 is about a 3% earnings yield, and if earnings are steady the stock is effectively equivalent to a bond at that rate.)
For a growth stock, you have to ask yourself "How much growth do I believe is left in this market?" A company that's growing at 20% annually but has only a year left before it plateaus (like FB or NFLX last year) should trade at about a 20% premium; that'd imply a P/E of 35. But a company that's growing at 20% annually and has a decade of growth left (like FB at IPO) should trade at about 6x that original multiple, for a P/E of 180. An earnings yield of 0.17% implies a P/E of about 600, which implies that earnings should grow 20x before the company reaches a steady state. That's a little high but not totally out of the ballpark for Coinbase (earnings: $3B, market cap $21B) if you assume its comps are companies like Bank of America (earnings: $32B, market cap $293B) or J.P. Morgan Chase (earnings: $48B, market cap $363B).
Also note the effect of interest rates on valuation. At 10% rates, a value stock should have a P/E of about 10. For a growth stock, the effect is much more pronounced, because in the decade that it takes for the company to start raking in serious cash, that bond will be worth 2.6x as much and the company's long-term earnings need to be discounted accordingly, on top of the lower steady-state P/E. That's the real reason why tech growth stocks shot up so high after the pandemic and now have crashed so hard. With higher rates, large cash flows in the future are worth relatively less because you can earn more with safe investments now.
P/E ratios have been pretty insane lately and just came back down to earth and I think your right that interest rates have a lot to do with stock price valuation of growth stocks but it’s not just growth stocks taking a beating right now. Why not grab a safe 3% return investment instead of a risky 6% return investment - or if both are 10% in your example I wouldn’t even consider that a value stock because it would be riskier with no reward. Of course a lot of the growth stocks have negative eps so near impossible to use this measure.
It's all dependent on interest rates, because that sets the discount rate that all investments are compared to.
A P/E of 30 is an earnings yield of about 3% (1/30). A steady cash-flowing stock will compare favorably to any bond with an interest rate of < 3%. When bonds are yielding < 3%, that's a good deal.
A P/E of 15 is an earnings yield of about 6% and change. When rates are in the 6% range, this is fairly valued.
A P/E of 6-10, like what was considered good in the late 70s, is an earnings yield of 10-18%. Sure enough, in the late 70s when you could actually get these P/Es, interest rates were around 18%.
There's math behind these rules of thumb. It all comes down to discounted cash flow analysis - if you understand the inputs that go into that formula, what the market does makes a lot more sense.
Except that's not how the markets work. Historically the PE ratios were much lower and the rates were much higher. Your model doesn't even work 5 years ago.
and when the gold rush is over, the shovel seller also goes out of business. Therefore, the shovel seller ought to sell their business _before_ the gold rush is over! Or find another use for shovels - unfortunately, i don't think there's much use for shovels outside of shovelling gold.
Tell that to Levi's, Wells Fargo, American Express, Armour Meatpacking, Studebaker motors, Ghirardelli chocolates, and Mark Twain, all of which got their start in the California gold rush.
Coinbase is in just a weird no man's land. If your bull case for crypto is replacing the US dollar as the world's dominant currency, why wouldn't some exchange in a regulation-free tax haven come to dominate, rather than a US corp?
I disagree. The purpose of a crypto exchange is to exchange crypto for national currency. This requires interaction with national banks because banks are the only entities that can hold national currency in digital form. E.g. to hold USD you need a correspondent bank in the US somewhere.
Bitfinex, which is incorporated in the Cayman Islands, is an example of your “ideal” bank. It has seen its US correspondent banks flee several times, leaving Bitfinex users unable to withdraw USD.
Coinbase is a US regulated exchange which US banks are much more willing to cooperate with since they perceive it as safer than working with some Cayman Island outfit.
The implication is that when crypto goes sideways, trading volumes drop, and thus, even though spread might be same or even better, the volume drop will have lost them money.
I'm a buyer at this point. We'll see how earnings turn out tomorrow, but no matter how bad the macro environment, I think $COIN at 7 P/E is a good buy long-term.
That 7 P/E is not real. I took a quick look at yahoo finance and they showed a negative 740 Million tax provision in Q2 of last year and negative 135 Million in Q3 of last year. A negative tax provision means they actually showed profit from taxes. The US government is not in the habit of giving companies hundreds of millions of dollars (almost a billion) in negative taxes so this is likely something not reflective of real profits.
I will not check what it is because I have no intention in investing in coinbase, but from experience from other companies these sharp profits coming from taxes are usually reversals of valuation allowances for tax loss carryforwards. They are non-cash items that do not have much to do with the current operation of the business.
So if you really want to do P/E investing and are using real money, I highly recommend you learn some financial accounting and learn to remove these one time accounting charges/incomes that do not really have much to do with the company's operation.
Furthermore, as it comes to coinbase, I should point out that their source of revenues is highly uncertain, and dependent on uncertain trading of exotic assets. When people talk about P/E there is an unspoken assumption of some business continuity. I am not sure this is present with coinbase, but you may believe differently.
Same. I've also bought Affirm, Shopify, Netflix, Peloton and Roblox in addition to Coinbase since they've all dropped ~70-90% in the last 6 months. I agree they were overvalued, but we seem to be in overreaction territory now. Even if we haven't seen the bottom yet, I think we'll see a lot of upside in these over the next 2-5 years.
Netflix really seems like a loser to me. Every production company has a streaming service now, and most make better content than Netflix. Sure Netflix’s app might be better, but it’s also twice as expensive as every other service. I guess that Netflix’s “replace basic cable” package might work for people who only want one service, but from what I remember most people did not especially like basic cable. Wouldn’t be surprised if Netflix is gone in 20 years.
Executives at Netflix should have known their stock was overvalued and used it as leverage in acquiring other companies with 100% stock. $300 billion was a lot of money they could have used.
In hindsight stock performance was the biggest advantage they had over competitors, now they have to compete with companies with bigger catalogs and more cash flow (e.g. disney parks)
Agreed. Netflix’s only option at this point is to merge with a large IP holder meaning Paramount (formerly ViacomCBS).
Netflix was not as aggressive as they needed to be in locking down must-see brands to 1) keep subscribers or 2) better negotiate with the content players.
Well it turns out a lot of the big players own huge swaths of IP and ramping up a streaming service is a lot less hard. Netflix tried to build a moat with it's own movies, but I guess so did the Hallmark channel
Netflix also tried to be more PC than PC and drove a lot of mainstream viewers away. Perhaps they thought being over the top in culture wars would be their moat? Or perhaps they were just drinking koolaid?
Is netflix really aiming to “replace basic cable”? Seems more like replace hbo and a couple of random other channels. The price is outrageous, but I feel like we are getting to the point where market penetration involves business deals where a fraction of the sub is covered by someone else (carrier, credit card, etc).
Look at the number of shows they produce compared to other services. On mobile so not going to link, but easy enough to find. Pretty clear to me that their strategy is to have a show for everyone’s favorite niche. Compare that to HBO where the strategy is to create shows that are actually good. 90% of Netflix is crap, and that’s not to say they don’t make good shows, they just make so many bad ones.
Should have probably given some evidence or whatever rather than appearing butthurt
Admittedly this list includes shows that have ended in addition to those that were cancelled. Those will mostly have more than one season. Pinch of salt.
A credit firm whose customer base is primarily folks who have to finance their small ticket item purchases in order to afford them is going to have a tough time in a rising interest rate environment. Their margins will compress as their cost of capital rises, and their default rate will rise as their borrowers slowly approach insolvency in a recessionary environment. I would be cautious about investing in anyone who is lending to borrowers who don't have sterling credit and/or strong balance sheets and durable cashflows this late in the cycle.
Their loan terms are typically 3, 6, 9, or 12 months. They’re not profitable and had $379 million in operating losses last year. Whether consumers ramp their demand for this product, which the data shows is overwhelmingly utilized for discretionary purchases such as fast fashion and their accessories, electronics, and digital goods, remains to be seen.
> 43% of Gen Z users have missed at least one payment, according to a survey by the polling site Piplsay. Of Gen Z consumers who used a point-of-sale loan for something they needed, 30% missed at least two payments, according to a survey by Credit Karma.
I'm not sure they care too much how much their bikes earn on resale as long as they get new owners, even if people give them away for free they earn money when those new Peloton owners subscribe at $40/month.
You can pedal the bike without a subscription, but you don't get any metrics tracking (you can't even pair it with your watch or iPad), and you don't get any of the interactive classes that most people buy the bike for. I pair my spin bike with my watch so I can track my workouts and performance, so would be pretty unhappy with a bike where I couldn't do that or at least see biking stats online like you can with the Peloton app.
But if you have the Peloton Tread treadmill, it's even worse, you literally can't use it without a subscription due to a new "safety feature".
So I'm actually in on PTON right now and feeling some pain, but what made it click for me was that the bike was completely unusable without a subscription.
At this point, returns and people just burning/destroying their Pelotons are the only risk.
In addition two things made me think about it:
- The kind of people who buy pelotons are usually not the people who worry about that amount of monthly charge and may keep it aspirationally
- The new game they put out (kind of guitar hero-y) actually doesn't look half bad, and the product itself is quite polished.
- In addition to buying the bike, people often buy one or two pairs of clip in cycling shoes -- Peloton could actually start becoming a go to for riding gear and have quite the audience to sell to from day one.
Anxious to read their recent earnings report tomorrow.
what made it click for me was that the bike was completely unusable without a subscription
That's why I went with a Keiser bike instead of Peloton, it was the same price for the bike, but no subscription needed, and I can easily use it with any spinning app. Plus I didn't like having a big expensive display on the bike, the Keiser has a simple 4 line LCD display.
I like the Peloton instructors, so I subscribe to the Peloton service, but I only pay $13/month for it (which makes the $40/mo they charge to Peloton bike owners seem like even more of a ripoff). I track my workouts with my watch, so if they raise the price too much, I'm not tied at all to Peloton and I'll just switch to another service.
Thanks for sharing, this makes a lot of sense, it looks like peloton has another win in the interior department but clearly less of a moat in the hardware department.
I think you’re more of a power user (and willing to tolerate set up pain) than most of the customer base would be, but how easily you’ve found a solution and competitor that works well with your method has been eye opening
Yeah I don't disagree with you there (I don't own one)
A bit more of my very basic reasoning was that at current prices the company was being as if it hadn't shown progress at all in the last ~2 years. They have at least sold units, added subscribers, and that's gotta be worth something even if a bunch of it is pulled forward.
Actually for a SaaS service (we'll leave aside whether it's worth it or not :), this is one of the best things that could happen right? If possible you want that LTV to be pulled forward so you can try to reinvest it in the business or make moves earlier rather than later?
P/Es are irrelevant here I think. $COIN is a transaction-based business. Transactions are correlated with the price of BTCUSD. BTCUSD is down 50% in 6 months. The r/wsb crowd and others just wont be as enthused to trade something that isn't going to the moon.
Thus, transactions will continue to trend down and $COIN will suffer.
Earnings next quarter will be interesting. Transactions are better correlated to the volatility of Bitcoin, so they should have quite a tailwind from it. Their problem will be if it scares people away from crypto. Q2 might be good, but the guidance will be bad.
also there may be a steeper discount tomorrow, when the forward estimates in the conference call talk about how something related to the macroeconomic environment and declining volumes and empty NFT marketplace, but who knows
its just that its not always about the earnings themselves
Yeah thats because its an unfalsifiable hypothesis, which undermines its credibility right out the gate
Any theory or hypothesis that has zero criteria for being proven wrong is not science and has no place being repeated at all
So you’re not wrong about it not contradicting, because nothing does since its a bullshit saying masquarading as a hypothesis, there’s just no point in leaning on it
There's various forms of the EMH. As a general heuristic does it really seem unreasonable to assume that a random HN commenter has worse pricing information than a wall st analyst?
NET is massively overvalued here, given the selling and repricing context. It could drop by another 50% and still be very richly priced. It's trading for 28 times sales, which is absurd. I say that as a big fan of the company's long-term prospects. Wait a while yet, it can be had for below $45 at least.
Teladoc. Two times sales, a lot of negative sentiment on the stock (which I like to see so long as the business is sustaining).
Bet on the long-term for the segment and their position. Their operating condition is sound and they have plenty of cash. Future returns were pulled forward during the pandemic era for things like remoting xyz (eg Zoom is suffering from that beating now as well). Let the bearishness rip these stocks up (a hard swing back from the insane bullishness previously, which is typical of speculators), take advantage of the stupidity that will abound in the selling down (exactly as it did on the way up).
This is when you start looking at buying opportunities, to generate the returns later (even if it takes years). You take advantage of the big runs to sell to the fools chasing stocks like Teladoc at 6x-7x the present valuation. Buy sound companies with good growth horizons, bet longer-term in your calculating, buy cheaply enough to have a great moat / margin of safety. Rinse and repeat over time. It's all about taking advantage of the rampant irrationality, either direction.
Just don't make the mistake of significantly overpaying and the odds are tilted that much more in your favor.
They actually have opposite strategies - AWS and the other cloud providers charge a lot for outbound traffic to make it hard to leave them.
I don't know if edge computing really has the advantage Cloudflare wants it to have though; it reminds me of open source projects with a lot of mirrors thinking you'll carefully pick the one in the city nearest you, as if anyone even notices.
Having a ton of edges also give you the ability to do a lot more granular and faster DDoS/traffic load protection. You can, at its simplest form, just start dropping all incoming traffic to a destination at a node to save a site. With 10 or 20 POPs, that's a fairly big region. With thousands, it can get pretty targeted.
Every company claims to be worldwide, but when their site is down, they tend not to care so much if you just start nuking traffic from random foreign areas to come back up.
Not sure if Cloudflare does this today, but the potential is there.
It's not the P/E itself but ALL the future earnings discounted to the present using an appropriate discount rate that counts. See the uncertainties involved here? :)
If you can predict a range for the future earnings and discount them and if it is underpriced , do buy :) .
Catchy phrase, but what is actually wrong with dollar cost averaging through a downturn? It seems to be the only effective way to invest for the long term.
(Disclaimer that I own some NET so I don't necessarily believe this is the case for them but also am probably biased). You can't really know it's a downturn until it ends and pops back up. Otherwise it's just their downfall. If a stock is going to just drop and continue dropping until bankruptcy, or plateau forever at a low point, then cutting your losses early would be better. But no one can really be sure which way a stock is going to go in the long-term. If you believe the dip is just a temporary thing and end up being correct then yeah it's a good play. If you end up being wrong it's just a slow way to lose money.
Best way to mitigate that risk is to have some inside information that they're not going bankrupt.
And the best legal way to do that is to be a customer or prospective customer and observe that there are no other ways to accomplish what you want to.
There're a number of beaten-down tech companies that IMHO would pass that test: NET and COIN are two of them, ZOOM, probably SHOP as well (the small businesses I know on them swear by them). I'd stay away from Affirm, Peloton, Netflix and Roblox, though - those are the ones where, as a customer, I just don't get much value out of them and could easily go elsewhere.
Yea would like to know any cons in this strategy. I’m dca’ing a portion of my paycheck every month. In Canada we have tfsa’s which allow for a certain contribution per year that is tax free if you get gains.
For the last few months my monthly contribution gets swallowed up by the losses and the balance hasn’t moved lol
You're basically gambling on monetary policy at the end of the day. If QT is steadfast, this market is at best going to be L shaped and volume will shrink for Coinbase. If QE remains, might see a reflation of the bubble.
That term gets used way too often and way too loosely. At some level, everything is a Ponzi Scheme. I think "pump and dump" is more accurately descriptive. And you never know: YC suppressing bad press on HN and promoting good press could be considered market manipulation.
Everything isn’t a Ponzi scheme though. The current well known profitable tech companies were all profitable before they IPOd except for Amazon and Netflix(?). Apple, Microsoft, Google, Facebook, Intel, Nvidia, etc.
Have there been any successful sustainably profitable tech companies to go public since Facebook?
$FB was barely profitable, IPOing with a 400 P/E. And they had losses in two consecutive quarters a year after the IPO[1].
AMZN wasn't profitable for 7 years, then fell to unprofitable again in 2012 and 2014[2].
AAPL was net in the red from 1996 to 2003[3].
So, were all these companies "Ponzi schemes" during the eras where they were investing in growth?
And if your only qualification is to "be profitable" for something not to be a Ponzi, then why are you here ragging on places like Coinbase? Coinbase is a 5.7 P/E company with $4b in net cash right now.
So, you don't even bother respecting what I wrote? Cool. I'm sorry I bothered to help you.
If your definition of "Ponzi Scheme" is simply that a company is profitable the moment they go public, then not even the original Ponzi Scheme was a Ponzi Scheme.
I think this is baby out with the bath water situation. Its an expensive stock but for good reason. Network lock in, strong durable brand, sound business model, product oriented. In the right sector where travel demand picks up and work flexibility has opened more of the market.
So I'm a crypto non-believer. I see it as the ultimate solution looking for a problem.
But that doesn't apply to Coinbase because, at its core, Coinbase should be a transactional business that is a proxy for the size of the crypto market (or, more specifically, the crypto trading volume).
I don't know enough about the financials of Coinbase however. It could be they have risks unrelated to their transaction business. For example, Robinhood was almost made insolvent by excessive exposure to GameStop. Does Coinbase engage in some weird margin business where they're exposing themselves to proprietary risk? If no, it seems like a good buy.
In the short term? Sure. That's why it's 75% off the peak. If you think the entire crypto market is going to go under then (again) yes. But as ridiculous as I think crypto generally is, I don't think it's going anywhere. YMMV.
I mean cash is better for strictly better for illegal activities. That misconception has stuck and just stays there. One leaves way to many crumps with non-private digital assets. And private ones are treated like the plague.
Plus KYC and compliance checks for any exchange in the USA and EU (dunno about the rest of the world) practically bans anything iffy.
Compliance requirements have been stricter in Coinbase from my point of view than my banks...
And my comment: Piracy and kidnapping of property existed long before cryptocurrency -- just google Somalian pirates. I don't have to reason about person kidnapping I assume.
Also: https://en.wikipedia.org/wiki/Ransomware#Encrypting_ransomwa... please read the history of ransomware. I guess all the criminals of the past since 1989 need to use time machines because they could not possibly do ransomware pre-cryptocurrency... /s
P.S. Downvoting because you disagree with a comment that addresses another comment is not really polite.
They make money from people transacting. Every buy or sell on their platform nets them a commission so their total revenue is directly proportional to how frothy the market is feeling.
A major crash like we’ve been seeing in both the traditional market and crypto space means there is less money coming in, less money moving around, and less fees for Coinbase. And with a persistent recession you’re not going to see people coming back in for a while.
They generate a lot of their revenue from a fee percentage for every transaction, so it really shouldn't affect them on crypto price swings, as long as people are still purchasing crypto.
Yeah don't want to say "addiction" like "buy the dip" (as it continually went down)
I thought I was smart turning credit into cash but I also was losing money through fees.
Anyway after messing around with my own trading bots (at loss not using smart algos or anything) I'm not sure if it was worth it... fun project I guess/code practice. At least for that I was just messing around with small amounts eg. <$100 per account (about 10). But if you don't have money to do day trades crypto is cool for that.
oh yeah I'm currently poor so I'm definitely no financial genius
Best way to grow wealth as an individual in your position is to maximize your income any way you can. You won't get rich investing $100 here and there, likelihood that you'll make good money gambling is also extremely low.
In that spirit, coding practice is probably a good thing and was probably worth the money spent.
Oh yeah I agree with that. Some job hop boom increase. I just gotta not burn money next time. I also give away money to my family but I generally don't feel too bad about it (they're in 3rd world country, I'm also fighting that mine mentality/make more). not a virtue signal I wish I was less nice
I remember the "dotcom crash" of 2000, after which all of the scuttlebutt was about how the internet was a fad and all the related investments were just a giant bubble. The rhetoric I'm hearing today about crypto is strangely reminiscent. How it will turn out, nobody knows, but humility is warranted if history is any guide.
People weren't saying the "Internet is a fad" back then.
They/we were saying that many of the businesses that were being heavily invested in were unsound because they lacked a real plan towards profitability. Many businesses had no chance of turning profit, but were VC funded like crazy. I worked at a company that was doing "group buy" purchases and the product themselves weren't really getting real group discounts, so they just burned investment money to discount them. Literally buying customers under the thought that getting scale would just eventually solve the problem. And then the whole house of cards fell apart.
It wasn't until a few years later, when Google figured it out with AdWords, etc. that people started making real money.
There's no inherent reason to assume that this will happen with cryptocurrency.
“The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law' becomes apparent: most people have nothing to say to each other! By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s”
-Some dude who writes for The New York Times...
There were some “the Internet is a fad” takes, but it wasn’t a widely held viewpoint. No one pushed back on corporations putting up websites. “Crypto is snake oil” is pretty common right now, and a lot of people are rejecting NFTs.
I wonder when "2005" for crypto will be. Like if we compare them by metrics like maturity of technology, developer attention, VC money, etc, how do "web2" and "web3" compare?
Not sure why you're getting downvoted. I wasn't even alive during the dotcom bubble but every account I've heard of it sounds similar to the cryptosphere. Insane valuations. People blindly jumping on the bandwagon. Money blindly being thrown around left, right, and centre towards anything 'web3'. Plagued with tremendous amounts of arrogance, greed, and hubris. People buying Lamborghinis and the like. Classic gold rush mania.
It is not the same (I was alive during the dotcom bubble).
In contrast to bitcoin/etc, it was always clear how broadly useful the internet would be.
Even while companies with inflated valuations like eBay were being battered, a broad amount of the mainstream population was using the sites every day and loving them.
It does not feel the same with cryptocoins, where owning an NFT Ape remains some peculiar niche thing and typical people have no relationship with cryptocoins at all.
Generalizations are not generally valid. You are putting whole ecosystem into the same bucket. Yes, there are a lot of shitcoins.. But there is also Bitcoin.
Gods I know. Basically everything I invested in in my spare time day trading during the pandemic is down to an insane degree. My entire portfolio is in the red except Tesla, AMC and Nvidia. Shits getting real depressing.
I'm up 40% since Jan 1 2022. I've been short the markets and shorted AMZN since November 2021. I've made roughly $100k on it and just closed my position today.
According to the SEC, day trading is not itself a form of investment due to the lack of fundamental analysis, a lack of long term thinking, a bigger focus on price movements and a more technical approach.
But of course, by a number of other definitions, it is. It really just depends on what yours or someone else's frame of reference is.
Growth stocks dont exist anymore, all companies with growth potential remain private unless it’s insanely capital intensive i.e car manufacturing. Software doesn’t qualify, they went public only to provide early investors liquidity.
You don't want a very fun time generally, that's merely when you sell and realize your profit.
You want some brutal, unrelenting misery with extreme bearish selling. That's when you strike your claim, that's when most of the future returns are set - that's the beautiful buy point. You don't get rich chasing and buying markets ever higher, you get rich buying cheap while everybody else is busy running for cover, and then you sell back to them when they come back to pay N times what you did (and whether it takes six months or six years is irrelevant so long as the return is good enough).
it's cheap because it's riskier. The risk may or may not pan out - if it doesn't, you make a high premium on taking the risk. But make no mistake, a cheaper stock is the market indicating that the stock is risky. The alpha of investing is to know when the market may have mis-priced the business.
Its like a mini dot com crash. A lot of pandemic had incredible growth that is was truly sustainable. Now you have companies want their employees back in the office. So all that "growth" that could have been this year is not there.
It is interesting that Bitcoin is only down 50% in the same time, that means Coinbase is not strictly correlated with BTC then. So, there must be another reason why Coinbase is down, which would be interesting to figure out.
Value of BTC is what people will pay for it now. Value of COIN is the discounted value of all future cash flows, which is heavily correlated with what people will pay for BTC in the future. COIN is doubly-levered on interest rates: its future earnings are tied to BTC, which itself tends to drop when the stop market does, but those earnings are also discounted by the prevailing interest rate. When rates go up earning lots of money from high BTC prices in the future doesn't mean a whole lot.
Google is "propped up" by index funds*. Everyone who isn't an edgy reddit wsb/crypto meme lord has been told over and over to buy SPY et al with religious devotion and take the "guaranteed 6/7/8/9/10%" annual returns to a happy retirement. They tend not to touch their portfolios until things get super ugly, which we may see soon.
*propped up is a bit complicated here, people are just buying these bundles of corporations without making any value judgement on them individually. More realistically though, Google is the one propping up a bunch of companies that aren't as actively traded but are still on the index. People you've never heard of like Leidos Holdings, or companies that make you deeply question the contents of the index like Bath & Body Works, Inc. and Norwegian Cruise Line Holdings Ltd.
No one holds the sentiment that Coinbase or growth stocks is a risk-free investment. Google on the other hand was held to the esteem of being cash / better cash equivalent. It's not.
I can't read OP's mind, but their earnings call is tomorrow.
Coinbase is a very successful business with actual earnings and a large profit margin, it's just people's opinions of its future income that have changed.
Seems like the elephant in the room across the board in this market, whether you're talking about Netflix, Coinbase or anything else, is that we haven't seen inflation out of control for 30+ years and now here it is. An entire generation are now adults or even into middle age who never experienced it before. Most especially, never experienced how difficult it can be to control because it is such a self-reinforcing phenomenon.
I have no idea if this is going to turn out to be the protracted downturn or again something we bounce back from. But there is definitely at least something different in the equation now that we have not seen for a long time.
I'm generally an optimist, but I'd say if people are buying this dip, at least do it with your eyes open and buy it slowly and steadily, being prepared that it could be a 5-10year recovery period.
Your warning was wrong though. The price went up to over $300, so buying on the IPO would've been the correct decision if you also sold them at the beginning of the year.
It's just a high risk high reward gamble as everything related to crypto
Initially it was 'reported' and estimated at $200 - $250 for the IPO price, but actually started trading at over $400 a share [0], which is the near top where the majority of retail entered and bought in at those prices.
After the first day of trading, it went down to $328.28 a share. [0]
So my warning was correct to not buy on IPO day or even anywhere near those prices.
what is your opinion re: the whole thing being extremely over-valuated at the getgo? We had already some solid competitors and Coinbase business model is they only make money if customers buy or sell crypto.
When you have wealth VCs, who are flush with cash, taking a company public, you can know right then and there that the future of growth and revenue is lackluster, at least from the insider perspective. Obviously, sometimes they get it wrong and a company does better than expected after going public. But if the insiders thought the company was poised for extreme growth, why would they sell their shares to unsuspecting, small time investors?
IMHO, companies that IPO and stay stable, or IPO and drop, are doing their early employees a favor at the market and institutional investors' expenses.
I can't fault that.
If the market's willing to overpay, and the money goes the people who actually built a company, where's the harm?
That’s the problem, crypto as an asset class has been nothing but a QAnon-fueled meme “stock”. Unfortunately, I don’t think this is the end of it until we see much more pain.
I can’t believe that real friends and family members that I know seriously invested in Dogecoin.
It's going to be a rough time for anyone who had high hopes for their equity compensation.