The Coinbase Momentum Play: Why Short-Term Investors Should Consider COIN Stock Now

Stocks to buy

Coinbase (NASDAQ:COIN) stock is one of the beaten-down tech stocks that’s rebounded most impressively in 2024.

The company’s recent results point to strong earnings growth, in line with the recent rally across most crypto assets.

Bitcoin (BTC-USD) has led the way higher this year, growing over 65% just this year. With most large- and mid-cap cryptos seeing similar rises, transaction volumes have picked up as traders step back in the game.

For Coinbase, which generates most its revenue and earnings from transaction fees, that’s a good thing.

Coinbase has gained market share in spot trading and saw institutional transactional revenue grow by 161% in Q4, driven by improved market conditions and product suite expansion. Let’s dive into whether this momentum can continue.

What Happened

Coinbase’s ongoing battle with the SEC appears to be heating up. Opening briefs have been filed with the Third Circuit Court of Appeals, as Coinbase seeks to appeal for a more structured rule-making process.

Coinbase also accused the SEC of over stepping its power and authority. That said, Coinbase also questions the SEC’s lack of clear regulations that they have been imposing on cryptocurrencies, which hindered the sector’s growth.

In a pivotal ruling, the SEC rejected Coinbase’s rule-making petition in December 2023 with a 3 to 2 vote.

Chairman Gary Gensler argued existing regulations sufficed for Bitcoin ETFs, while Commissioners Peirce and Uyeda advocated addressing technological advancements. Coinbase swiftly appealed, condemning the decision as unlawful and a breach of administrative protocols.

Coinbase’s legal action highlights a regulatory dilemma for crypto firms: the SEC requires compliance without clear rules. This ambiguity stifles industry growth and leaves companies needing more clarity on regulatory navigation. 

Apart from the appeal to the Third Circuit Court of Appeals, Coinbase faces a lawsuit in New York. Accused of operating without registration, hearings are ongoing, awaiting a ruling from Judge Katherine Polk Failla.

COIN Stock Just Surpassed Initial Listing Price

Upon its 2021 direct listing, the leading U.S. crypto exchange debuted at $250 per share, peaking at $350 in November. Subsequently, it ended its inaugural year with a 38% decline.

Despite regulatory challenges and market fluctuations, Coinbase experienced a remarkable resurgence, buoyed by Bitcoin’s surge and SEC-approved spot Bitcoin ETFs, driving a 300% stock value increase in the last year.

Recently, COIN surged 5% the day Bitcoin reached $70,000. It’s clear the Bitcoin surge also affects Coinbase, but other companies in this sector as well.

Although the road ahead remains uncertain for this crypto exchange, it’s clear momentum is pointing in the right direction again.

Coinbase Could Be a Speculative Buy Here

Coinbase is a stock I think is probably best viewed as a trade, rather than a long-term hold. So long as this crypto momentum continues, there’s a case to be made that Coinbase could see meaningful profitability and cash flow growth.

On a fundamental level, that should make the stock a buy, in the eyes of many value-conscious growth investors.

However, as we’ve seen with previous downturns in the crypto sector, the downside can be vicious. This is a stock that’s great while everything is working. But given regulatory headwinds and other macro concerns, plenty of things could go wrong over the medium- to long-term.

Thus, I’d say COIN stock is a fine speculative buy for those with shorter-term investing time horizons. I’m still on the sidelines with this stock, as I take a longer-term view of such companies. But there is a strong case to be make to own this stock to take advantage of the momentum in the market right now, for those willing to do so.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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