Coinbase stock sees record winning streak. Americans are bullish on crypto again
Bitcoins
rally this year has not only led to a record rise in the shares of Coinbase Global
,
but has apparently piqued Americans’ interest in digital assets – boding well for the cryptocurrency broker’s revenue.
Cryptos have rallied to start 2023, with Bitcoin this week surging above $28,000, its highest level since last summer, as the digital bear market accelerated into a major slide that saw prices end around $16,500 in 2022. These gains has been driven by shifting expectations about the future of US monetary policy, with traders expecting the Federal Reserve to ease painful rate hikes after pressure on banks sparked panic in recent weeks.
The trend has strengthened Coinbase (ticker: COIN) stock. Shares of the broker climbed 11.8% on Tuesday, snapping seven straight days of gains — adding nearly 50% to its market value — the stock’s longest winning streak ever.
While Coinbase stock is one of a handful of crypto-exposed names fluctuating in line with the price of Bitcoin, there are signs in this latest crypto rally that both bode well for the broker’s business and could bring more gains for digital assets.
Look at the so-called Coinbase Premium, a metric tracked by data firm Crypto Quant that measures the difference between Bitcoin prices listed on Coinbase and those on Binance, the world’s largest crypto exchange. Since Coinbase is most popular in the US, and Binance is an offshore behemoth, the gap can be read as an indicator of how crypto demand among Americans stacks up compared to the rest of the world.
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After spending much of 2022 in discount territory, Coinbase Premium has been positive for most of 2023 and rose to a gap of more than $100 this week, the highest consistent level since the heat of the Bitcoin bull market in 2021. (The gap reached the highest level in at least three years during March 11-12, above $220, but that is likely a result of weekend trading on Coinbase becoming more expensive as a result of a lack of liquidity in the markets, not investors flocking to the broker.)
Investors choosing to chase crypto profits on Coinbase are a tailwind for the group because – despite efforts to diversify into more stable lines of business with recurring revenue – the broker still relies heavily on trading fees as a source of income.
US Tiger Securities upgraded Coinbase to Buy on Monday with a price target of $200 — the stock closed Tuesday at $84 — based on the thesis that a new crypto bull market is about to emerge. If true, analyst Bo Pei sees Coinbase stock more than doubling to levels not seen in a year, as the recent bull market quickly turned into a bear market.
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The trend is also going both ways, with signs of US investors returning to crypto trading after largely dropping out last year, also contributing to Bitcoin’s price trend. US retail traders – Coinbase’s core customer base – are a highly influential group, having played a key role in the recent Bitcoin bull market. Coinbase also attracts more institutional investors than Binance, so a growing Coinbase Premium could signal the return of positive institutional buying pressure.
Write to Jack Denton at [email protected]
