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Buying a Coinbase stock (COIN) to gain indirect exposure in the Bitcoin (BTC) market has been a bad strategy so far compared to simply holding BTC. 

Notably, COIN is down by nearly 50% to almost $186, if measured from the opening rate on its IPO on April 14, 2021. In comparison, Bitcoin outperformed the Coinbase stock by logging fewer losses in the same period — a little over 30% as it dropped from nearly $65,000 to around $41,700

BTC/USD (orange) vs. COIN price (blue). Source: TradingView

What’s bothering Coinbase?

The correlation between Coinbase and Bitcoin has been largely positive to date, however, suggesting that many investors consider them as assets with similar value propositions. That is primarily due to the buzz around how COIN could become a simpler onboarding experience for investors into the crypto sector compared to buying Bitcoin, Ether (ETH), and other digital assets.

COIN’s correlation with BTC on daily basis. Source: TradingView

But the COIN product is facing increasing competition with the arrival of crypto-based exchange-traded products (ETP), mining stocks, and similar crypto-enabled firms listed across Wall Street indexes. This may have reduced its demand as the go-to asset for gaining crypto exposure.

Related: Bitcoin faces new ‘milestone’ in 2022 as new forecast predicts BTC price ‘in the millions’

Additionally, COIN faces downside risks due to its depressive forecasts for FY22. Coinbase stated in its latest earnings report that the crypto volatility could turn 2022 into an unprofitable year, noting their adjusted EBITDA losses could come to be around $500 million if its monthly transaction users come at the lower end of its guidance range.

Coinbase’s adjusted EBITDA margins. Source: JR Research

Jere Ong, the principal analyst and founder of JR Research, noted that 96% of Coinbase’s total revenue in Q4/2021 came from the fees charged on retail transactions, which highlights its business model’s “inherent weakness.” Excerpts from his report:

“We believe it offers a short-term buying opportunity for speculative investors. But, we do not encourage investors to hold COIN stock for the long term unless you have a very high conviction of its execution.

Bitcoin’s risks are entirely different

Bitcoin is a different beast when compared to the shares of centralized company like Coinbase.

Absolute scarcity, censorship-resilient decentralized ledger, and gold-like properties as a potential hedge against-inflation in the digital age are just some of the concepts driving up BTC price today. 

As a result, analysts and strategists predict Bitcoin to reach anywhere from zero to “millions” per 1 BTC, depending on who you ask.

Elsewhere, most of the crypto-exposure stocks have also suffered more compared to Bitcoin. Namely, Nasdaq-listed mining firms Canaan, whose stock value fell by nearly 80% year-over-year, and Riot Blockchain, which dropped 67.55% in the same period.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.