Coinbase (COIN) – Growing Tailwinds as Cryptocurrency Interest Swells?

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Coinbase, the largest cryptocurrency exchange in the US, has seen its shares perform strongly in the second half of this year, rallying from around $46 in early June to a current level of $150. This rally has been driven by a pickup in interest, and volume, in the cryptocurrency space as markets price in the potential announcement of several spot Bitcoin ETFs and the latest Bitcoin halving event.

There are currently 12 spot Bitcoin ETFs sitting on the US Securities and Exchange Commission’s desk waiting for approval from a range of blue-chip investment companies including BlackRock, Franklin Templeton, and Fidelity. These spot ETFs invest directly in Bitcoin – unlike the current futures-based Bitcoin ETFS – and as an investment vehicle would allow a wide range of investors to gain exposure to a regulated product that tracks the performance of Bitcoin accurately. Coinbase is the named custodian in nine of the twelve applications and would hold the underlying Bitcoin on behalf of the issuing companies. Coinbase would charge for this service.

The latest Bitcoin halving event is predicted to occur in mid-April 2024 and with it will bring increased volume and volatility before and after the event. This increase in Bitcoin turnover will also waterfall down the cryptocurrency market into other larger-cap cryptocurrencies and the alt-coin market.

While some of this increased interest has already been priced into the share price, the chart suggests that the shares can go higher still. The shares traded as high as $428 when they appeared on the market in April 2021 before falling over the next two years. Coinbase shares have broken above the 20- and 50-day simple moving averages and now look set to test the 38.2% Fibonacci retracement level at $183 before the 50% Fibonacci retracement level at $230 comes into play. The weekly chart also shows how Coinbase shares have turned from making lower highs and lower lows to now making higher highs and higher lows, a bullish setup.

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As always with cryptocurrencies, a strong degree of caution and firm risk management need to be applied before making any investment decision. If ETFs are not approved by the SEC or are delayed further, Coinbase shares could turn lower quickly, and traders need to factor this in before entering any trade.

Coinbase Weekly Chart

Source: TradingView, Prepared by Nicholas Cawley