Investment research firm Citron, founded by prominent Wall Street short-seller Andrew Left, has called for the short sale of Coinbase (COIN) stock following the exchange’s temporary outage on Feb. 28.
“The recent $COIN site malfunction makes the long Bitcoin/Short Coinbase trade one of the most compelling trades in the crypto market,” Citron wrote on Feb. 29, adding: “This means going LONG bitcoin through an ETF and short the bloated Coinbase exchange."
The recent $COIN site malfunction makes the long Bitcoin/Short Coinbase trade one of the most compelling trades in the crypto market. This means going LONG bitcoin through an ETF and short the bloated Coinbase exchange.
— Citron Research (@CitronResearch) February 28, 2024
Institutional investors frequently long one asset and short another as a hedging move, betting that the long asset will increase in value and the underlying short asset will lose value in a divergence trade. On Feb. 28, Coinbase, along with other crypto exchanges, suffered a temporary outage as a result of a Bitcoin (BTC) flash crash that saw a 10% decrease in the price of the digital asset before paring losses.
During the Coinbase outage, users reported zero account balances and errors in buying and selling. “All customer account balance display issues have been restored on Coinbase.com. Thank you to all of our customers for your patience today,” the exchange wrote in a follow-up message on Feb. 29.
Since the U.S. Securities and Exchange Commission approved spot Bitcoin exchange-traded funds in January, Coinbase has become the world’s fourth-largest publicly-traded asset exchange, with a market cap of more than $50 billion. In addition to the resurgence of Bitcoin to its $60,000 milestone, the exchange has benefited from being one of the custodians of spot Bitcoin ETF managers, where it facilitates the exchange of BTC transfers to ETF shares according to user demand.
Despite Citron’s bearish stance, the short-seller is not always correct in its market predictions. In late 2022, shortly after the collapse of cryptocurrency exchange FTX, Citron called for the shorting of Ether (ETH) in a now-deleted tweet.
“We continue to be short ETHER as we believe this $130 bil token has as many common sense flaws as does the whole SBF story,” the short-seller stated at the time. Since the sell recommendation, Ether has returned 182% and now trades at $3,434.
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