Coinbase Global (NASDAQ:COIN) went public in 2021 with a direct listing and a reference price of $250. On its trading debut on April 14, COIN stock opened at $381 reached a high of $429.54, then hit a low of $310 and closed at $328.28.

The first day of trading is often a rollercoaster, and Coinbase saw a lot of the volatility that comes with the crypto market. As COIN stock is now near $230, does this further selloff make it a buy?

Coinbase is facing a mix of negative factors right now. The regulation of the crypto market with a recent crackdown in China is a big contributor. Additionally, a Securities and Exchange Commission (SEC) decision made Coinbase abandon a lending program, and a recent broader economic crisis in China didn’t help COIN stock.

These factors are pivotal to the future of Coinbase. The main bullish argument for COIN stock would be its strong revenue growth and profitability. But as we know, a stock’s performance depends on the broader sector, the industry and the state of the economy — all of which will affect Coinbase shares.

China’s Crypto Crackdown Was Inevitable

On Sept. 24, news that regulators in China banned crypto trading and mining sent Bitcoin (CCC:BTC-USD) on a freefall. It tumbled more than 9% to the important psychological level of $40,000.

According to Reuters, “China’s most powerful regulators on Friday intensified a crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.”

China’s central bank stated that it longer allows the use of cryptocurrency for transactions, trading or mining. Coinbase, which makes revenue from crypto transactions, saw share prices drop upon the release of the news.

At close on Sept. 24, COIN stock was trading for $231.82, losing only 2.39%. I say “only” because the market reaction to the crypto crackdown did not show panic, but moderate losses instead.

But for Coinbase, having a total ban on crypto imposed by regulators in China signals a loss of revenue. Its commissions on crypto trading may soon come under pressure.

China is one of the largest global economies, with a population of about 1.4 billion. That’s about 18% of the entire world — and a massive number of people that Coinbase can’t do business with. However, China’s regulatory bodies have been hostile toward cryptos before, so this decision had been somewhat factored into the stock’s outlook.

Evergrande and More Bad News for COIN Stock

In addition to a share price dip, Coinbase’s “debut junk-bond sale fell to fresh lows after the Chinese government banned all crypto transactions and vowed to stop illegal crypto mining,” according to Bloomberg.

Selling pressure on the Coinbase bond means investors are worried about the severity of this crackdown. A loss of momentum for revenue growth in the next quarter would be bad news for the company, and this could affect its bond price too.

But this wasn’t the only piece of bad news for Coinbase. It had to abandon its plan to launch a crypto lending program, as U.S. regulators were threatening to sue the company. This means less revenue growth for Coinbase, as an attractive and probably profitable business opportunity was lost.

Additionally, Evergrande (OTCMKTS:EGRNF), one of China’s largest real estate developers, recently caused global financial turmoil as its potential bankruptcy was publicized. This panic proved to be short-lived, but its implications are severe.

China’s economy is probably poised for further regulation in the real estate market, and investors may start reallocating riskier assets into safer options, such as bonds. It is not hard for a local crisis to spread. If such a risk-averse mood is to prevail in global financial markets, then chances are the crypto market might face selling pressure.

COIN Stock Faces Regulation and Competition

The decision to ban crypto in China may soon be replicated in other countries, such as the U.S. We should expect to see stricter regulation on cryptocurrency in the coming months and years, and this risk is too big for Coinbase.

The problem is that the severity of the regulations remains highly uncertain. Will the new crypto rules be too strict, or will they be moderate? The good news is that Coinbase might have some say in the matter.

The company is allegedly pitching regulations for cryptocurrencies to U.S. officials. This is definitely a step in the right direction, as U.S. regulators must discuss what the largest U.S. crypto exchange will bring to the table.

I consider this a very clever and strategic move by Coinbase. It will test the waters and probably lead to beneficial decisions for both parties.

Outside of potential federal pressures, competition in the global crypto industry is already intense and will get worse. Coinbase has to respond quickly and innovatively when its competitors offer new initiatives and products. For example, Coinbase now offers cloud services.

The crypto industry is not just about assets with trading volume. It is also about a pricing war when it comes to expenses and fees. If Coinbase has to lower these costs and fees to gain more customers, it may hurt its profitability.

Revenue Is Strong, but Coinbase Is Risky

Coinbase’s second-quarter earnings were impressive. For the first six months ended June 30, total revenue surged to $4.03 billion compared to $377 million for the same period in 2020. Diluted net income per share rose to $9.60 in the first half of 2021 compared to just 15 cents in 2020. A surge in free cash flow occurred, too.

I believe Coinbase may face a severe revenue growth slowdown. With stricter regulation underway, COIN stock now has an asymmetrical risk-reward ratio. There are too many severe risks that are not balanced out by the potential gains.

I would recommend a wait-and-see approach to COIN stock. We do not know the actual bottom yet; although Bitcoin has recovered its losses, I expect plenty of volatility to sustain. If the risk-averse mood prevails to any degree, Coinbase may face more selling pressure.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.