Coinbase: Breaking A 2-Year Trend
Coinbase has long been considered a reasonable proxy for bitcoin. When Donald Trump got elected last year and promised to bring a crypto-friendly perspective to the White House, investors got excited.
The price of bitcoin went from $67,000 just before the election to more than $100,000 within several weeks. Trump’s announcement that the U.S. would establish a strategic bitcoin reserve further fueled optimism that the government would be making significant purchases.
But then the trade war sucked the oxygen out of the room and the White House stopped short of saying that a U.S. recession would be avoided. Add to that the fact that the White House proposed funding the strategic reserve with existing seized bitcoin as opposed to new purchases and sentiment dipped further.
The price of bitcoin has been falling for roughly the past two months and Coinbase’s stock has fallen with it.
source: StockCharts
Coinbase has seen fairly consistent support on the trendline above since the beginning of 2023. It’s held at multiple points, the most recent of which occurred late last year. It couldn’t hold this year though. It broke through that support line in late February and has been heading lower since.
In the process of breaking below the trendline, it’s also broken below all of its major moving averages.
Sentiment, of course, is very weak. The MACD indicator1 flipped to bearish in early February even before the stock started declining. It’s currently at its worst level since 2022 and has much work to do to get back to even a neutral level.
The Chande Trend Meter2 has also moved decidedly negative, but it’s not quite in red territory yet. I don’t think that’s of much consolation to current shareholders, but it could indicate that a reversal is near. The last several times this reading has dipped into this area, the stock staged a sustainable reversal higher.
The RSI3 is also on the brink of oversold territory. Over the past several years, the stock has done a good job of bouncing off the 30 level and could be primed to do so again given where the other technical measures are currently at.
Overall, we feel that Coinbase is likely to remain highly correlated with bitcoin both for good and bad. Crypto is likely to see a more favorable political backdrop during the Trump administration and that could provide a level of support. Bitcoin, in the end however, is a volatile and speculative security. If the economy continues to trend negatively and investor sentiment remains sour, Coinbase could face some tougher sledding.
If you’re looking for an easy way to add enhanced Coinbase exposure to your portfolio, consider the GraniteShares 2x Long COIN Daily ETF (CONL).
1According to Investopedia, the MACD (or moving average convergence/divergence) indicator is “a technical indicator to help investors identify price trends, measure trend momentum, and identify entry points for buying or selling.”
2According to ChartSchool, the Chande Trend Meter “assigns a numerical score to a stock or other security, based on several different technical indicators covering six different timeframes. Distilling all this technical information down into a single number provides an easy way to identify the strength of the trend for a given security.”
3According to Investopedia, the relative strength index (or RSI) “measures the speed and magnitude of a security's recent price changes to detect overbought or oversold conditions in the price of that security.”
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