I Like The Stock.
There is one equity that has caught my attention in recent weeks. I like it’s positioning, it’s price and it’s outlook in both the short-term and through the rest of 2024…
The stock is Coinbase. ($COIN) COIN 0.00%↑
There are a few reasons I like it.
Let’s get into it:
The technical setup looks great. I am not a big “technical analysis” investor myself, but you still need to be aware of the charts. As Stanley Druckenmiller says, if everyone is drawing the same lines on a chart, then you need to respect those lines. Coinbase has formed a huge bull flag since March and is also sitting right on it’s 100 Day Moving Average, which has acted as key support/resistance many times over the last few years.
In addition, Coinbase is very closely correlated with Bitcoin (not surprisingly). I’m also very bullish Bitcoin through year end, but I prefer Coinbase here as the company does benefit from both up and down price action in crypto. The last earnings report blowout confirmed that once again. They are also launching their new smart wallet shortly which should drive much higher volumes and revenues. Plus, if Bitcoin does continue on to new highs this year, Coinbase should outperform it on a percentage basis.
Because of how closely the two are linked, it is important to understand the basic Bitcoin cycle and where we are in it…
Two important factors for the rest of 2024:
Bitcoin just had it’s “halving” a few weeks ago
It’s once again an election year
Let’s look at Bitcoin’s performance in the last 2 halvings/election years:
2016:
Mid May → Election Day: +62%
Mid May → Year End: +128%
Election Day → 1 Year Forward: +920%
2020:
Mid May → Election Day: +58%
Mid May → Year End: +234%
Election Day → 1 Year Forward: +357%
Coinbase went public in 2021. Past performance never indicates future results, but it goes without saying that the stock would have benefitted greatly and should again if the cycles continue, or even come close.
Speaking of Election Day, you can’t ignore the political (and fiscal) dynamics facing Bitcoin and Coinbase this year. It has become a very obvious fact that the Biden Administration is not too friendly with the crypto space. Therefore, Donald Trump has naturally become the “pro-crypto” candidate. With Trump leading in the polls, crypto is a very interesting political play that should benefit massively not only if Trump wins on November 5th, but also in the months leading up to the election. If his lead in the polls increases or he wins and crypto is discussed more as a policy issue, the entire space should benefit from the publicity. I think all of those scenarios are likely.
For the Biden Administration, fiscal policy will be a big focus for the remainder of this year. Leading up the November there will be much more talk on the national debt and our multi-trillion dollar annual deficits. In my opinion, this will only continue to draw eyes onto Bitcoin, crypto and again… Coinbase. I think most will agree that Biden and Yellen will do everything they can to keep the markets up and liquidity strong over these next few months. This fiscal/political motivation likely helps feed into the “election year cycle” returns that I posted above. Simply put, I think the largest, most popular and most government-friendly US crypto exchange is set up perfectly for a huge run.
I have recently initiated a long position in my personal portfolio.
DISCLAIMER:
This is not financial advice. For entertainment purposes only. Make your own decisions. These are my personal opinions. I am not responsible for any losses.