Coinbase Shares Now Sitting Near Reference Price; Why That Makes Them A Buy

This article was written exclusively for Investing.com

  • Coinbase Earnings Grow from Exchange Volume and Asset Class Market Cap Expand in 2021
  • Pick and swipe in crypto asset class
  • The inclusion of COIN has pushed the stock to an unsustainable level
  • The price has gone down and traded below the pre-issue reference price
  • COIN is the purchase of less than $250 per share

Love them or hate them, cryptocurrencies have provided market participants with unprecedented returns over the past decade. However, the path to making profits with the digital token asset class has been quite exciting, with massive price swings in either direction.

In 2021, it traded in a range above $40,500 – from $2,8383.16 to $68,906.48. At $41,600 on January 10, the price was more than $7,000 below the mid-point of the 2021 trading range.

The second leading cryptocurrency is trading in the $4,150 range, from $716,919 to $4,865,426. At $3,050 on January 10, Ethereum was still above its average 2021 trading range.

These amazing price swings can be a nightmare for investors, but they create a paradise of opportunity for savvy traders with their fingers on the pulse of choppy markets.

Coinbase Global (NASDAQ :), a cryptocurrency exchange in Wilmington, Delaware is the world’s leading crypto betting agent. The exchange facilitates the buying and selling of leading cryptocurrencies.

COIN went public during April 2021. As of January 10, 2022, the stock was trading below its initial reference price of $250 after hitting a high after going public during the first day of trading on April 14, 2021. Shares closed yesterday At $225.01.

At under $250, COIN could be the best bet for 2022 as a crypto asset class.

Coinbase Earnings Grow from Exchange Volume and Asset Class Market Cap Expand in 2021

According to the company’s own description, Coinbase provides the infrastructure and technology for the crypto-economy to retail users. It is also an exchange with a liquidity pool to deal with institutional crypto assets.

In addition, it provides technology and services that enable ecosystem partners to create crypto-based applications and securely accept crypto assets as payment. The company was founded in 2012, just two years after Bitcoin came onto the scene.

COIN is the number one cryptocurrency trading platform, making it similar to the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), in that it facilitates financial transactions albeit in different markets.

The market capitalization of the crypto asset class has grown from $767.482 billion at the end of 2020 to $2.166 trillion at the end of 2021, an increase of over 182%. After the last drop, the market cap was at $1.92 trillion on January 10.

Pick and swipe in crypto asset class

Pick and shovel game in any market refers to a strategy where one invests in the underlying technology used to produce a type of good or service rather than in the product itself. In other words, one invests in companies that support the growth of the core business.

Pick and dredging firms may or may not move up and down with the prices of the underlying assets in which they are involved.

In the cryptocurrency world, COIN acts as a facilitator. Like CME, ICE, and a sports betting agent, COIN generates returns on transaction volume because it requires fees from buyers and sellers to execute deals.

While revenue is not based on prices, bull markets tend to encourage more volume as market participants tend to be more active when prices are rising rather than falling.

The inclusion of COIN has pushed the stock to an unsustainable level

Coinbase did not take the traditional IPO route when it went public. Instead, it was listed directly on the NASDAQ stock exchange.

In this way, the company avoided investment banking fees and closing periods for early investors. The stock started trading on April 14th. Excitement about the asset class that drove bitcoin’s price from five cents in 2010 to nearly $70,000 per token at a 2021 high has pushed COIN shares to a peak of $429.54 on their first trading day.

Like many new tech entrants to the stock market, COIN shares hit an unsustainable level on April 14 as its market capitalization soared to the $100 billion mark, above CME or ICE (NYSE:) at all-time highs. The pre-listing price was $250 per share.

Source: Barchart

As the chart shows, COIN shares have fallen like a stone from their high on April 14, reaching $208 a share on May 19, 2021, just a month after the listing. The value of COIN shares has halved from its peak in April to its lowest level in May.

Trading below the pre-issue reference price since May

Since May, COIN has remained within its trading range. But the price recovered to a lower high of $368.90 on November 29, a day before the two largest cryptocurrencies, Bitcoin and Ethereum, reached their highest levels.

After November 10, Bitcoin and Ethereum put major bearish reversal patterns on their daily charts, resulting in a pattern of lower tops and lower bottoms that continued into early 2022.

daily coin

Source: Barchart

The chart shows that COIN was trading below $225 on January 10, well below the pre-listing reference price of $250. The first technical support level stands at July 19, the lowest level at $213.22.

Below there, the May 19 low, $208, is the crucial support for the stock. COIN shares reached a low of $214.64 on January 10.

COIN is the purchase of less than $250 per share

The volatility in cryptocurrencies has been unprecedented, with prices more than doubling and halving in 2021. COIN shares have seen the same volatility as the pick and shovel game in the asset class. Three factors point to higher COIN prices in the coming years:

  • COIN is the leading cryptocurrency exchange, so it is likely to grow with the asset class.
  • Cryptocurrencies are becoming more and more popular assets as a medium of exchange and investment.
  • COIN technology will allow it to take a leadership role when governments issue digital currencies in the coming years. It is only a matter of time before the digital Chinese yuan, US dollar, euro and other currencies come to market.

COIN shares fell below the reference price, which is an opportunity for investors. Coinbase provides exposure to the crypto asset class without the need for a computer wallet. Rather, it is a conventional investment in an unconventional asset class.

I am a tiered buyer of COIN shares below $230, which leaves plenty of room to add further declines. Over the past years, buying Bitcoin and Ethereum due to weak prices has been optimal. The cryptocurrency is likely to recover when the cryptocurrency finds bottoms and moves higher.