Coinbase Shares Now Near Reference Price; Why That Makes Them A Buy

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Coinbase's profits from exchange volume and asset class market cap expansion grew in 2021
Pick and play on the cryptocurrency asset class
COIN's listing pushed stocks to unsustainable levels
The price fell and traded below the pre-issue reference price
COIN is a purchase of less than $250 per share
Love them or hate them, cryptocurrencies have provided market participants with unprecedented returns over the past decade. However, the road to gains through the digital token asset class has been hair-raising, with wild price swings in both directions.

In 2021 traded within a range of over $40,500 – from $28,383.16 to $68,906.48. At the $41,600 level on Jan. 10, the price was more than $7,000 below the midpoint of the 2021 trading range.

The second leading cryptocurrency, , traded in a range of $4,150, from $716,919 to $4,865,426. At the $3050 level on Jan. 10, Ethereum was still above the average of its trading range in 2021.

These incredible price swings can be a nightmare for investors, but they create a haven of opportunity for nimble traders who keep their fingers on the pulse of volatile markets.

Coinbase Global (NASDAQ:), the Wilmington, Delaware-based cryptocurrency exchange is the world's leading cryptobookie. The exchange facilitates buying and selling in the leading cryptos.

COIN went public in April 2021. On January 10, 2022, the stock traded below its original reference price of $250, having reached lofty levels following its public debut on its first day of trading on April 14, 2021. Closed yesterday at $225.01.

Below the $250 level, COIN could be the best bet for 2022 as the cryptocurrency asset class continues to grow.

According to the company's own description, Coinbase provides infrastructure and technology for the crypto economy for retail users. It is also an exchange marketplace with a liquidity pool for trading crypto assets for institutions.

In addition, it provides technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto assets as payment. The company was founded in 2012, just two years after Bitcoin came on the scene.

COIN is the leading cryptocurrency exchange, making it comparable to the Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE) in that they all enable financial transactions, albeit in different markets.

The market cap of the cryptocurrency asset class grew from $767,482 billion at the end of 2020 to $2,166 trillion at the end of 2021, an increase of more than 182% last year. After the recent decline, the market cap on January 10 was $1.92 trillion.

Pick and shovel play on the cryptocurrency asset class to produce some sort of merchandise or service rather than investing in the product itself. In other words, one invests in companies that support the growth of the underlying business.

Pick and shovel firms may or may not go higher and lower with the prices of the primary asset they are involved in.

In the world of cryptocurrencies, COIN operates as a facilitator. Like the CME, ICE and a sports bookmaker, COIN earns revenue on transaction volume as buyers and sellers charge a fee to transact.

Although earnings are not based on prices, bull markets tend to encourage more volume, as market participants tend to be more active when prices are rising rather than falling.

COIN's listing pushed stocks to unsustainable levels

Coinbase did not take the traditional IPO route when it went public. Instead, it quoted directly on the NASDAQ.

In this way, the company avoided investment banking fees and lockout periods for early investors. The shares began trading on April 14. The excitement over the asset class that took the price of Bitcoin from five cents in 2010 to nearly $70,000 per token at its peak of 2021 pushed COIN shares to a peak of $429.54 on the first day of trading.

Like many new entrants to the new technology sector in the stock market, COIN shares hit unsustainable levels on April 14 as its market cap soared to the $100 billion level, ahead of the CME or ICE (NYSE:) at their respective all-time highs. – time highlights. The pre-listing price was $250 per share.

Source: bar chart

As the chart shows, COIN stocks plummeted from their peak on April 14, reaching $208 per share on May 19, 2021, just over a month after listing. COIN stocks have halved in value from their April high to their May low.

Trading since May below the pre-issue reference price

Since May, COIN has remained within its trading range. But the price recovered to a lower high of $368.90 on Nov. 29, a day before the two top cryptos, Bitcoin and Ethereum, hit their all-time high.

After November 10, Bitcoin and Ethereum posted bearish key reversal patterns on their respective daily charts, leading to a pattern of lower highs and lower lows that continued into early 2022.

Source: bar chart

The chart shows that on January 10, COIN was trading below the USD 225 level, well below the pre-listing USD 250 reference price. The first tech support level is at its July 19 low at $213.22.

Below that, the May 19 bottom, $208, is critical support for the stock. COIN shares hit a low of $214.64 on Jan. 10.

COIN is a purchase of less than $250 per share

Volatility in cryptocurrencies is unprecedented, with prices more than doubling in 2021 and halved. COIN stocks have experienced the same volatility as a pick and shovel game on the asset class. Three factors point to higher prices for COIN in the coming years:
COIN is the leading crypto exchange, so it will likely grow with the asset class.
Cryptocurrencies are increasingly becoming mainstream assets as a medium of exchange and investment vehicle.
COIN's technology allows it to play a leading role when governments issue digital currencies in the coming years. It is only a matter of time before a digital Chinese yuan, US dollar, euro and other currencies hit the market.

COIN shares have fallen below the reference price, representing an opportunity for investors. Coinbase provides access to the cryptocurrency asset class without the need for a computer wallet. Rather, it is a traditional investment in a non-traditional asset class.

I am a winding down buyer of COIN stocks below the $230 level, leaving a lot of room to add further declines. In recent years, buying Bitcoin and Ethereum on price weakness has been optimal. COIN is likely to recover when the top cryptos find bottoms and move higher.

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