Coinbase Results Soar! Can Bitcoin still help? （2024.05.14）

Hello, this week's Tech Tracker analyzes the largest cryptocurrency exchange in the United States — Coinbase$Coinbase(COIN.US)$.

Hot Spot Events

After closing on May 2, Coinbase released Q1 reports, with both revenue and profit exceeding market expectations.

The data showed that the company generated revenues of $16.4 billion, up 112% year-on-year, better than the expected $13.6 billion; earnings per share of $4.40, almost quadrupled from the expected $1.15!

Coinbase said the company's profits soared, thanks in large part to a massive increase in the value of cryptocurrency assets held by the company, bringing in a pre-tax profit of $7.37 million. This revenue actually belongs to the book profit, most of which is not realized.

Needless to say, Bitcoin did great for Coinbase's performance that exceeded expectations. Bitcoin prices continued to climb higher after the U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETF listing in January, soaring to a March high of $7.3 million from $4.4 million at the beginning of the year.

For Coinbase's controversial outlook, many analysts have been “downbeat”. According to FactSet data, analysts who rate Coinbase as “sell” or “lower” have fallen to about 20% from 41% in January. Overall, analysts rated Coinbase as “Hold” with a target price of around $239.

Despite Coinbase delivering a better-than-expected Q1 report, the company's share price continued to fall after the announcement, having collectively fallen by more than 10% as of May 14.

Looking ahead, while Bitcoin ETF listed trading has driven institutional enthusiasm for crypto investments, market concerns about the fundamentals of Coinbase persist. Coinbase, for example, is facing intense competition and ongoing legal disputes from some of its lower-cost trading platforms, which, coupled with significant uncertainty over Bitcoin's movements, pose a potential risk to its business.

Technical analysis

Trend analysis:

In early February 2024, Coinbase launched a strong upswing. In just two months, the stock has soared more than 130 percent to hit a high of $283, hitting a new half-year high. The main reason is that the spot Bitcoin ETF has been approved to go on the market by the US SEC, prompting a new round of Bitcoin bull markets.

Coinbase's share price also began to rebound as Bitcoin receded. As can be seen from the gold dividing line, as of May 14, the share price pullback is close to 50%.

Indicator Interpretation:

• The chart shows that Coinbase's share price is suspected to be in a head and shoulders pattern after hitting a two-and-a-half-year high, and trading volume has continued to shrink from left shoulder to right shoulder, suggesting a possible reversal of the mid-term trend downward.

• The 20-day average (MA20) and the 50-day average (MA50) are dead forks, confirming the short-term weakness since the Q1 report was published.

• The share price is currently near the threshold of breaking through the falling wedge, or there is a chance of a short line bounce.

Direction of attention:

As the largest cryptocurrency exchange in the United States, Coinbase's short-term share performance is largely dependent on the outlook for the cryptocurrency market. Simply put, it's about watching Bitcoin rise or fall.

From a technical analysis perspective, investors can focus on the gold split's 50% pullback ($198) and 61.8% pullback ($180) to see if the share price can seek some short line support.

This content discusses technical analysis, and other approaches, including fundamental analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect the expected results.

All investments involve risk, including the potential loss of principal, which cannot guarantee the success of any investment strategy.