Coinbase's Brutal Math: Recovering From an 85% Loss Requires a 567% Gain

Coinbase's recent volatility has taken its toll on investors, but even more so on those who leveraged their bets using the GraniteShares 2x Long COIN Daily ETF (CONL). The fund, which aims to deliver twice the daily percentage move of Coinbase Global (COIN), has lost around 85% year-to-date.

This is a stark reminder of the destructive power of leverage, volatility, and compounding in leveraged single-stock ETFs. While CONL's strategy targets 200% of COIN's daily percentage move, it does not promise twice its cumulative return over extended periods. This distinction matters greatly for investors who fail to grasp the nuances of daily compounding.

Take a hypothetical example where Coinbase falls 10% one day and rebounds 11.1% the next. The stock breaks even, but the leveraged ETF still loses more than 2%. Repeat this process over months of violent rallies and selloffs, and the gap between the two can become substantial.

An 85% loss changes the math entirely. A $10,000 investment would be reduced to just $1,500. To recover completely from this loss, the remaining capital must gain approximately 567%. This is a sobering reality for investors who thought they could simply ride out the downturn and double their money.