It’s been a bad day for Coinbase (NASDAQ:COIN), the leader in cryptocurrency exchanges, as the stock is down in today’s session. The overall decline in cryptocurrencies sent Coinbase lower, as values on the leading coins slipped to lows not seen in the last several months. Given the overall state of the last several months, that’s a pretty substantial drop indeed. A slate of other developments, like one particularly large bitcoin investor moving coin off Coinbase, also contributed to the drop.
The last 12 months for Coinbase stock have been highly volatile. Last September started with a slow rise, which challenged $370 per share. All bets were off after November’s first week concluded, as Coinbase started a slide downward that kept going into May.
The downward slide ended with one short plunge, going from $123.56 on May 2 to $53.72 on May 10. A modest recovery followed, leaving Coinbase at its current level of around $70.
While the hit to Coinbase was substantial, it’s not likely to slow down any time soon, either. While there are some points giving Coinbase some extra hope of success in this market, there are some others that will drag on Coinbase’s chances.
I was bullish on Coinbase back in July, but now, I’m moving to neutral. The rising economic slowdown is likely to weigh heavily on cryptocurrency demand. That will impact Coinbase’s future going forward. There’s a path to victory for Coinbase, but it’s going to take some very precisely-threaded needles to win here.
Investor Sentiment Shows Positive Signs for COIN Stock
Even as things start looking bad for cryptocurrency, and cryptocurrency exchanges, clear signs of hope emerge. Coinbase has a Smart Score of 7 out of 10 on TipRanks currently. That puts it at the highest level of “neutral.” It also suggests a better-than-even chance of ultimately outperforming the broader market. There are also unexpected signs of new life coming out of insider trading figures. Insider trading at Coinbase is actually turning buy-focused after mixed figures over the last year.
While there was little in the way of informative transactions, the aggregate offers its own assessment. In the last three months, there were 14 buy transactions staged and just three sell transactions.
The last informative trade goes back to four months ago when director Frederick Ernest Ehrsam III bought just over $1.8 million worth of Coinbase shares. The aggregate, meanwhile, points to 39 buy transactions and 45 sell transactions. The bulk of these sales, however, took place in the closing days of 2021.
It’s Good News and Bad News for Coinbase Stock
Coinbase is not wholly bereft of good news. There’s quite a bit going on that might give the company some hope going forward. Further, it might keep people buying digital currencies that may work out well as an investment going forward.
For instance, Coinbase has attracted some exciting buyers of its stock outside the insider chain. Three days ago, reports emerged that Shopify (NASDAQ:SHOP) CEO Tobi Lutke picked up around $1.5 million worth of new Coinbase stock. However, it’s worth noting that these purchases stem from a Rule 10b5-1 trading plan set up back in May that automates some trades.
Coinbase is also working to improve its presence and take advantage of the upcoming U.S. midterm elections. Coinbase rolled out a new politician identifier tool that illustrates just which politicians are holding cryptocurrency right now. That will give voters some extra insight on who to vote for, and they’ll have Coinbase to thank.
Word from JPMorgan suggests that higher interest rates could give Coinbase an extra $1.2 billion in revenue. That’s thanks to Coinbase’s own holding of USDC or U.S. Dollar Coin; a stablecoin pegged directly to the dollar.
However, there are some problems ahead. Not the least of these is Coinbase putting cash behind a lawsuit targeting the U.S. Treasury Department regarding Tornado Cash.
Further, the Securities and Exchange Commission (SEC) is also actively working toward more regulation on cryptocurrency that would put more onus on Coinbase and increase its operating costs to ensure compliance.
Then there’s the elephant in the room. The ongoing massive inflation that’s hitting a lot of folks right now isn’t likely to let up before the midterm elections.
With gas prices and food prices still high in many places, the idea that many will be putting their spare change into crypto investments seems a bridge too far.
Even the news of a major holder pulling bitcoin from Coinbase is a mixed blessing. Removing bitcoin from Coinbase can improve its outlook. It makes bitcoin less liquid by taking it out of circulation.
However, it can also be interpreted as a vote of no-confidence in Coinbase’s ability to safely store cryptocurrency. Not everyone will, of course, but everyone that does might choose to leave.
What is the Price Prediction for COIN Stock?
Turning to Wall Street, Coinbase has a Moderate Buy consensus rating. That’s based on eight Buys, eight Holds, and two Sells assigned in the past three months. The average Coinbase price target of $103.44 implies 43.6% upside potential. Analyst price targets range from a low of $42 per share to a high of $220 per share.
Conclusion: COIN Stock Has a Thorny Path to Victory
We’re left with a strange aggregate picture. While there are clear potential signs of good news for Coinbase—and, by extension, its investors—there are also clear troubles ahead. Thus, I’m neutral on Coinbase overall. If the positives work out as well as investors hope, and the negatives can be sufficiently suppressed, then Coinbase might well break out to the upside. However, that approach requires a lot to go right. These days, betting on everything to work as planned is one of the longest shots there is.