CNBC Firebrand Jim Cramer gave Coinbase stock a ringing endorsement yesterday, telling viewers to invest 5% of their portfolio in cryptocurrencies. Responding to a callers question, the veteran hedge fund manager who hosts “Mad Money” called Coinbase (NASDAQ: COIN) “inexpensive”.
The backing of the well-followed TV host comes at just the right time for Coinbase Global Inc. Despite Bitcoin flirting with $50k for the last two weeks, COIN has been trending lower, losing 15% since the 16th of August. And even in light of BTC’s recent turnaround, the Coinbase stock price of $248.56 is a dismal 42% below its debut-day high of $428.93. Talking of April’s pill-fated IPO, Cramer said:
I don’t really care for management because I think they let out a lot of stock when they started. I was against that. They should’ve been buyers, not sellers. I think the listing went very, very poorly. I think the company is the … natural repository of crypto.”
Seemingly, the media coverage does appear to be bearing fruit. The Coinbase price is slated to open around $257 today, more than 4% above last night closing price. However, early investors still face an uphill battle to break even.
On the daily chart, we see that yesterday the Coinbase stock price was testing the resolve of an uptrend at $247.00. If the price had fallen below this level, it would undoubtedly have lead to follow-though selling. Furthermore, basis the projected opening price, COIN has broken above a descending trend line at $256.20. Therefore, the Cramer bump may have averted the immediate danger.
If, as expected, the price opens above $256.20, this would constitute a bullish breakout which should send the price higher. A logical target then becomes the $294 high set earlier this month. However, whether a rally is sustainable will depend on how the crypto market trades going forward. Whilst the bulls will be encouraged by the positive coverage, Coinbase stock relies on the notoriously volatile crypto market, And as such, is an unpredictable investment.
If the cryptocurrency market sentiment sours, this will exert downward pressure on COIN. The reverse is true on the way up. Therefore, instead of thinking of COIN as listed security, investors should view it as a bitcoin proxy. And on that basis, they should allocate capital accordingly.
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