Here is my two cents on Coinbase ($COIN) – January 11, 2024
Dan here at STOCKMARKETMENTOR.com. I was looking at Coinbase ( NASDAQ: COIN ) today. A lot of these ETF issuers, BlackRock ( NYSE: BLK ), etcetera, etcetera, are going to be doing their business with Coinbase ( NASDAQ: COIN ) in buying and selling cryptos.
So you would think that Coinbase ( NASDAQ: COIN ) would be doing really, really well, but that is really not the case right now. We’ll look at the weekly chart, you can see that this is definitely in a turnaround mode. I have already drawn the stuff here, left shoulder, head, right shoulder, here’s the neckline.
This is a perfect head and shoulder pattern. This is what is called a throwback, where it breaks out and then comes back to test the breakout, which was here, and then it accelerates higher. So no question about it, in this chart, this is a reversal pattern, definitely a reversal pattern.
With respect to this being a reversal, that’s fine. But there are fundamental matters at hand, which is crypto and how is this going to affect Coinbase ( NASDAQ: COIN ). Whereas, prior to this, if somebody wanted to trade crypto, they were trading crypto. And one of the biggest dogs on the porch here is Coinbase ( NASDAQ: COIN ).
That’s where I have my account, not that that means anything, but it’s the biggest most trustworthy one. Suddenly they’re not the only game in town. The rates, the commissions for trading crypto with Coinbase ( NASDAQ: COIN ), it’s like off the charts, they’re really, really high.
When you’ve got a huge volume producer like these ETFs, and they need to be transacting, whether it’s in Bitcoin or Ethereum or whatever else. They are going to have massive leverage to get these rates down. And that will generate, per trade, less money for Coinbase ( NASDAQ: COIN ).
Now, you could say, “Alright, yeah that’s great.” Well, the only reason they are going to have that leverage is because they are going to be trading a lot more. So it’s a typical deal, where if you are a high-frequency trader you are going to get a lot better commission rate than somebody who is not trading high-frequency. For the simple reason that, yeah, I’m making less per transaction but I’m making it up in volume, that type of thing.
So in my mind, there is kind of this push and pull. With respect to Coinbase ( NASDAQ: COIN ), is this advent of ETFs, going to be good for Coinbase ( NASDAQ: COIN ) or is it not going to be? Now, Scott McGregor, who’s my trusty sidekick and runs Crypto Market Mentor, has a lot more information than I do about this.
These Bollinger Bands, you look at this big fish hook here, this big downdraft, and then hook around, that’s a classic reversal of a big uptrend. This was really a peak on Friday, the 29th. This was a definite peak in this, and the stock has fallen 25 percent from this December high.
This has been a really big selloff, and so you could say, “Oh yeah, but it’s close to the 50-day moving average. That’s when I will look to buy it.” That may very well be a good trade. However, keep something in mind, you’re buying that stock when it hits the 50-day moving average. This thing in the box here, all this stuff in the box, that’s overhead supply.
Those are shares held by people who are ticked off that they bought up here and now they are losing money. And so what they are going to want to do is, on any kind of a price appreciation you will see some selling into this. And so whether or not this ultimately runs higher, 2, 3, 4 months from now, that’s a different story that I couldn’t answer creditably now.
Somebody else will tell you exactly what it’s going to do but they are just “bull spitting” you, nobody knows. But I know this, if this stock rebounds off of the 50-day moving average, it is going to be tough sledding to get this up to a new high.
I would be really, really careful of jumping on the Coinbase ( NASDAQ: COIN ) bandwagon and looking at this as just an amazing pullback opportunity. And I want you to think about it this way, is anything that I have said today, other than looking at the chart essentially in real time, but is anything that I have said today a surprise?
Is there some development that the market, as a whole, has not been anticipating? I’ll tell you the answer to that, no. Everything that I am saying here is known. And so when you see this kind of move higher, I think that a lot of this was this anticipation of the ETFs. It actually just got approved today but everybody knew it was coming.
You look at Gensler, what a tool that guy was. You know sooner or later they are going to have to approve them. And so at some point, this thing falls, and when does it do it? Well, the 29th, Friday, boom. The very next trading in January, that’s when you are getting the big volume selloffs. So people are holding this stock for tax reasons. They don’t want to pay their capital gains tax until 2025. That’s something that sounds good to me too.
What we have here is, in my view, pretty much a climax top. I think you want to stay away from Coinbase ( NASDAQ: COIN ). You can say, “Oh well, I’m just keeping a small position in this because I want to be able to track it.” That’s fine, that’s fine, but make sure you’re not holding this stock because you’re losing money and you don’t want to be wrong.
Don’t hold losing positions. You can always sell them and buy them back if you want. That’s what I always say, “You can always buy it back. But you can’t always sell something tomorrow at today’s price.” If you can just keep that in mind, you are never going to stray too far from where you need to be.
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