Investment research firm Citron, led by renowned Wall Street short-seller Andrew Left, has urged investors to short sell Coinbase (COIN) stock following the exchange’s temporary outage on February 28.
Citron stated on February 29, “The recent malfunction of the $COIN site makes the long Bitcoin/Short Coinbase trade one of the most compelling trades in the crypto market. This means going LONG on bitcoin through an ETF and shorting the bloated Coinbase exchange.”
Institutional investors often engage in long and short positions as a hedging strategy, speculating that the value of the long asset will increase while the value of the shorted asset will decline in a divergence trade. On February 28, Coinbase, along with other crypto exchanges, experienced a temporary outage due to a Bitcoin flash crash, resulting in a 10% drop in the digital asset’s price before recovering some losses.
During the Coinbase outage, users reported seeing zero account balances and encountered errors while buying and selling. Coinbase addressed the issue in a follow-up message on February 29, stating, “All customer account balance display issues have been restored on Coinbase.com. Thank you to all of our customers for your patience today.”
Since the approval of spot Bitcoin exchange-traded funds by the U.S. Securities and Exchange Commission in January, Coinbase has emerged as the fourth-largest publicly-traded asset exchange worldwide, with a market capitalization of over $50 billion. In addition to Bitcoin’s resurgence, reaching the $60,000 milestone, Coinbase has benefited from its role as a custodian for spot Bitcoin ETF managers, facilitating the exchange of BTC transfers to ETF shares based on user demand.
Despite Citron’s bearish position, the short-seller is not always accurate in its market predictions. In late 2022, following the collapse of cryptocurrency exchange FTX, Citron advised shorting Ether (ETH) in a tweet that has since been deleted.
“At the time, the short-seller stated, ‘We continue to be short ETHER as we believe this $130 billion token has as many common sense flaws as does the whole SBF story.’ Since the sell recommendation, Ether has delivered a 182% return and is currently trading at $3,434.”
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