In the fourth quarter of 2021, Coinbase’s stock was trading around record highs, worth more than $340 before starting to fall as technology stocks corrected into the new year. Those declines persisted into 2022, causing Coinbase to continue losing altitude as the year began.

The company’s Q4 earnings released in February were strong, but it warned of a slowdown in its trading business. That deceleration in trading activity continued, leading to the U.S. crypto exchange’s first-quarter earnings pushing the value of its shares to new lows.

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Despite rebounding to around $67 as of this morning, Coinbase’s worth fell to as little as $40.83 during its selloff.

From a high-flying direct listing with a massive market cap that proved crypto-forward companies could generate metrics that made traditional investors take note, Coinbase’s fall has been dramatic.

The drop of its stock has also been painful, as its declines were not simply due to changing market sentiment about technology companies — though that didn’t help. The company’s rising cost structure and falling revenues made it clear that ripping cash out of the crypto market was more expensive and variable than some public-market investors anticipated.

As much as Coinbase helped boost investor interest in crypto startups last year, it may now have the opposite impact. Coinbase was proof that crypto companies could post huge profits, but its success was built on top of rising demand for crypto assets and services. A strong Coinbase meant a strong web3 market.

What is the value of those same startups now that Coinbase has been repriced, and its underlying market flounders in the crypto equivalent of a recession?

In its recent Q1 results’ investor call, the company had notes on that very point. Let’s explore.

The public-private valuation gap

Before we dive in, it’s worth noting that little in our work today is unique to crypto. Most investors, both private and public, overvalued technology companies last year. Those erroneous valuation marks, set during one of the hottest periods for investment ever, landed all around the technology market, and are still being dealt with today.

But the crypto market does have a special issue in that its venture capital totals did not peak in Q4 2021, but in Q1 2022, meaning that the crypto startup investment cycle stayed hot longer, and that crypto startups will feel the pain (when it comes to managing too-rich private valuations) a little later than their more traditional counterparts.