Coinbase stock soared on Friday after news that the Securities and Exchange Commission may drop a case against the crypto exchange. But then it reversed as quickly and fell a staggering 8%. Shares are headed even lower on Monday. More damage can be seen on IBD MarketSurge charts where the stock has undercut its 200-day moving average.
Shares are falling even as the SEC adopts an increasingly lenient stance towards crypto exchanges.
According to Friday's reports, the SEC may drop a two-year lawsuit claiming that Coinbase should be regulated like a stock exchange. In a post on Twitter/X, the company said "SEC staff have agreed to dismiss their case against us (pending Commission approval)". The commission will vote on it.
Earlier, the Securities and Exchange Commission appointed a crypto task force to develop a framework for digital assets. The SEC had maintained that most crypto assets are securities and fall under its regulations. But Coinbase has been petitioning for a separate set of crypto rules since 2022.
On Monday, Robinhood, another trading platform for crypto assets, announced that the SEC was dropping a similar lawsuit.
Coinbase shares remain below their 50-day moving average along with the 200-day. Some may be tempted to buy the dip, but investors should examine some key technical indicators. Is Coinbase stock a buy or sell now?
Coinbase reported a strong fourth quarter on Feb. 13. Analysts polled by FactSet estimated sales of $1.8 billion, or a 93% surge, with earnings of $2.11 per share, which would be a 103% increase year over year. Coinbase blew that out of the water when it reported $2.3 billion in sales and earnings of $4.68 per share.
Shares rose above the 50-day line but the euphoria was short-lived.
November Elections A 'Monumental Catalyst'
JPMorgan analysts noted the November elections were a "monumental catalyst" for the crypto exchange, while Citi analysts believe the stock will remain a "risk-on play" in 2025.
Citi analysts also believe Coinbase could tap more revenue streams because retail trading volume remains well below 2021 levels. Coinbase could generate revenue through asset tokenization, embedded smart contracts and cross-border payments, but some of these areas await "clearer rules," the analysts noted.
Coinbase's Composite Rating is 82 out of a best-possible 99, while its EPS Rating is 82, according to IBD Stock Checkup.
The stock has started to lag several other stocks in the Investor's Business Daily database, going by its Relative Strength Rating of 52.
Meanwhile, Coinbase's relative strength line, which compares the stock with the benchmark index S&P 500, has trended lower since Dec. 6.
Find Stocks To Watch: From Top IPOs To Large And Small Caps
Coinbase Stock Crashes On DeepSeek News
On Jan. 27, shares of Coinbase crashed 7% amid news that a China artificial intelligence startup DeepSeek offers a far more efficient artificial intelligence training model than its U.S. counterparts.
On Jan. 23, the White House released an executive order with a view to promoting access to public blockchains for mining, validating and self-custody purposes. The order also made a mention of promoting stablecoins that are backed by the U.S. dollar while taking steps to prohibit the use of a Central Bank Digital Currency within the U.S.
Further, Trump also established a President's Working Group on Digital Assets Markets which will provide its proposals for a regulatory framework for digital assets within 180 days.
The Senate also voted to appoint Sen. Cynthia Lummis, R-Wyo., a supporter of cryptocurrencies and a backer of the bitcoin strategic reserve fund, to lead the Banking Subcommittee on Digital Assets.
Trump announced plans for a bitcoin strategic reserve fund back in July during a bitcoin conference, according to reports.
Bitcoin Affects Coinbase Stock Price
The price of bitcoin has affected the stock's performance. Bitcoin touched an all-time high of $108,659 on Jan. 20 as Trump took office. But the digital asset retreated from highs and hovered below $95,000 on Friday, according to CoinMarketCap.
Coinbase stock had an impressive run in 2024, gaining 43% while the S&P 500 rose just 23%. That performance followed an even more impressive gain in 2023, when the stock rallied 391%. Bitcoin doubled in 2024, and in 2023 it gained 150%. In 2022, bitcoin crashed more than 65% while Coinbase stock suffered an 86% fall.
How Invested In The Stock Market Should You Be Right Now?
Coinbase started in 2012 as a simplified way of trading bitcoin. The stock listed on the Nasdaq in April 2021 at an initial offering price of $250 a share. A direct listing allowed investors to sell the stock directly at the market price. The stock quickly rocketed to an all-time high of 429.54 but crashed, reaching an all-time low of 31.55 in January 2023.
Coinbase is the largest U.S. cryptocurrency exchange and allows trading in several other digital coins. The platform also offers crypto staking, custody and transfer services. Bitcoin and ethereum see the highest volume, but several other coins are also listed and trade on the Coinbase platform. According to its website, Coinbase has $273 billion in assets with a quarterly trading volume of $185 billion.
Mutual funds own 29% of shares outstanding. More funds have been buying the stock over the past six quarters. Not many funds have bought the stock over the last 13 weeks, giving the stock an Accumulation/Distribution Rating of D+ on a scale of A-E.
Coinbase Undercuts Key Level
Since Coinbase remains below the 50-day line and has undercut the 200-day line in higher volume, that is a sell signal. Its relative strength line on IBD MarketSurge, which compares the stock against the S&P 500, has also been falling. Shares have to retake the 50-day line in higher volume before Coinbase stock becomes a buy again.
Spot Bases And Buy Points With Pattern Recognition
As bitcoin retreats from highs, the stock has come under pressure and it would be better to watch until the stock retakes the 50-day line.
Also, fluid crypto rules and policies can move the stock in ways for which investors must prepare.
Please follow VRamakrishnan on X/Twitter for more news on the stock market today.
