Coinbase has been on a phenomenal run lately. The stock is up 40% in a week and up 200% in two weeks. Why is it so bullish? What’s behind the momentum, the sustained buying pressure, and the solid technical patterns? I thought I’d break it down for you all.
What's fueling the bullish momentum?
The first thing to note is that this is happening in the context of the Fed's monetary policy. Lower rates usually create appetite for riskier assets, which helps bitcoin and related equities. This was especially clear in the first 2 weeks of the 2020 bull run.
The second thing to note is that there’s a very bullish technical setup. The stock is breaking out of a cup-and-handle formation. This is a classic bullish pattern.
What’s the risk of relying on technical analysis?
While the cup-and-handle pattern might be a bullish sign, there's also the risk that this is a false signal, especially in crypto.
Also the cup-and-handle can take weeks or months to form. I don't think many want to wait that long.
How can fintech startups benefit from Coinbase’s growth?
Fintech start-ups in Asia can benefit from Coinbase’s growth by on-boarding more local stablecoins.
What are the regulatory challenges?
The regulatory environment could also affect Coinbase. If the SEC wins, it could force Coinbase to register as an securities exchange. This could substantially limit their business.
The accounting rules that were repealed and the SEC’s new rules for banks and crypto also create challenges.
