In recent weeks, and through no fault of its own, Coinbase (NASDAQ:COIN) is down more than a few U.S. dollars. So should you consider jumping in at the lower price in COIN stock? Here’s a closer look.
Coinbase, North America’s largest digital asset platform has taken it on the chin over the past month. At this week’s most reviled lows shares of COIN had shed nearly 33% from their Nov. 9 relative high.
Of course, if misery loves company, Coinbase investors don’t have to stray terribly far to commensurate.
Spanning the crypto market’s largest, most serious and even its most laughable Ethereum killing coins, it’s proven a tough few weeks for digital assets of all kinds.
And on the back of weak economic data, inflation and the Federal Reserve tapering fears (as well as the new Covid Omicron strain), the harm in recent days to the stock market hasn’t helped matters to be sure.
From Cloudflare (NYSE:NET) to Rivian (NASDAQ:RIVN) or another market bridging narrative like Matterport (NASDAQ:MTTR), the damage has been punishing in more than a few growth stocks of COIN’s caliber.
What to Expect From COIN Stock
But some of the loss inflicted since November has also been of Coinbase’s own manufacturing. Almost exactly one month ago COIN stock delivered a well-heeded earnings disappointment.
In front of the report and trading at its highest stock price since day one of its April IPO, investors elected to run for the exits with slightly fewer U.S. dollars to show for their efforts.
Shares of COIN tumbled just over 8% in the report’s immediate aftermath to begin what has turned into a full-blown corrective bear market. Behind the selling pressure investors took their cue from Coinbase’s profit miss, significantly weaker-than-expected sales and reduced monthly customer transactions for its third quarter.
Yet it wasn’t all bad news in Q3. Revenues more than quadrupled from the year ago period.
Coinbase also announced plans to launch a market to trade nonfungible tokens (NFTs). And to further grow its assets under management, COIN is now offering customers the ability to deposit their payday Benjamins straight into their trading accounts.
Lastly, the third quarter also marked a high profile deal with Meta Platforms (NASDAQ:FB). The off-and-on again bad actor formerly known as Facebook hired Coinbase for logistics on its new digital wallet for cryptocurrencies.
So, yeah you could say there’s some Britney Spears like, “oops, we did it again,” potential in today’s Coinbase shares.
Coinbase Weekly Price Chart
Source: Charts by TradingView
If COIN’s valuation is measured against the cadre of cryptos it allows investors to trade, it would still rank in-between No. 5 SOL-USD and No. 6 ADA-USD with its market cap of $57 billion.
What’s that mean? Other than not expecting that relationship to hold up very long, probably not much. The thing is everything could be overvalued and we’re just fooling ourselves, right?
Maybe of more value intrinsically, Coinbase is fetching more than meme vehicle DOGE coin and its dog-faced kin SHIB-USD, which have fallen just outside the crypto market’s top 10.
On the provided weekly price chart, COIN stock’s bear cycle has dismantled a bullish handle which had been developing in the right side of its saucer base. It’s disappointing, but I’m not bearish at this juncture.
The saucer itself, as well as a couple higher-lows remain intact and the bear’s margin for error is now greater. That’s not to say I’m a buyer of Coinbase shares though.
With stochastics still out of position I wouldn’t be too fast to act on the premise COIN is a bargain, even if you see other positives with Coinbase’s business to back up the purchase.
For now, I’d suggest waiting on a bullish crossover in the secondary indicator. And if the trend is going to truly turn friendly, price action needs to confirm a weekly low.
Ultimately, that type of patience should give investors a better chance of riding COIN’s volatility to the bank and enjoying a long-term play on the emerging digital asset market, rather than getting robbed with cause.
On the date of publication, Chris Tyler holds (either directly or indirectly) positions in Grayscale Bitcoin and Ethereum Trusts (GBTC, ETCG and ETHE). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.