Coinbase: S&P 500 Inclusion Marks Crypto's Mainstream Moment

Coinbase (NASDAQ:COIN) is a stock that I have been covering since New Year's Eve last year when I viewed it optimistically for 2024 at around $146. Since that time, the stock has soared and reached highs of over $190 in 2023.

Coinbase is a cryptocurrency exchange platform that enables users to buy, sell, and trade various digital assets. It is a significant player in the rapidly growing crypto industry, and its performance is closely tied to the overall market trends in cryptocurrencies.

Last week, an interesting event unfolded as S&P 500 inclusion rumors swirled around Coinbase. This sparked a rally in the stock, which had floundered in recent months.

Now, while the S&P 500 inclusion is undoubtedly a mainstream moment for crypto, I personally prefer to view it from a broader perspective. In my view, crypto has already achieved a significant mainstream moment.

Coinbase: A Troubled Stock in 2023

To set the stage, Coinbase stock had a rough start to 2023. It faced several challenges, including a decline in trading volume, increased competition, and regulatory uncertainty.

This combination of factors put pressure on Coinbase's revenue, leading to a lower-than-expected earnings report for the first quarter of 2023. Consequently, the stock price floundered and struggled to gain any significant traction.

However, the tide began to turn when rumors of S&P 500 inclusion began circulating. As the possibilities of this inclusion grew, so too did the rally in Coinbase stock.

This rally was further fueled by a slight increase in trading volume, which is a positive indicator for the exchange platform.

As the second quarter of 2023 progressed, analysts at Mizuho and Credit Suisse both adjusted their price targets for Coinbase stock. Both institutions had a neutral rating on the stock but raised their price targets.

Mizuho raised its price target to $90 from $70 and Credit Suisse adjusted its target to $78 from $68.

The S&P 500 Inclusion: A Mainstream Moment

The prospect of S&P 500 inclusion for Coinbase is certainly a significant event in the cryptocurrency domain. It marks a moment where a major crypto firm is recognized and integrated into one of the premier stock market indexes in the U.S.

This inclusion would undoubtedly bring increased visibility to the crypto industry among institutional investors who track the S&P 500. It could also lead to more significant inflows into crypto markets from these institutions.

However, I prefer to view the mainstream moment for crypto from a broader lens.

In my opinion, crypto has already achieved several mainstream moments in recent years.

For instance, consider the news coverage of Bitcoin (BTC) during the 2017 bull market or the recent integration of Bitcoin into small-cap indexes. These events are part of a broader narrative that positions crypto as a mainstream asset class.

The Importance of Chart Analysis

Examining the chart of Coinbase stock, we can observe a symmetrical triangle pattern that has been forming since December last year. This pattern typically indicates a period of consolidation or ranging behavior in a stock price.

As of August 4, the stock price has broken out of this symmetrical triangle pattern, which may be a positive technical signal for bulls.

Moreover, the Relative Strength Index (RSI) on the 14-day setting has moved above the oversold level of 30, which is another bullish technical factor.

However, it's crucial to note that the stock price is still trading below the 200-day Simple Moving Average (SMA), which could be a bearish factor.

Overall Technical Analysis:

Bullish Factors:

Symmetrical triangle pattern breakout

RSI above oversold level

Bearish Factors:

Stock price below 200-day SMA

What to Expect Next

In the coming months, it will be interesting to observe if there are any more price target adjustments from analysts covering Coinbase stock.

Additionally, keep an eye on the trends in trading volume, which could provide further insights into the exchange platform's performance.

Finally, the news of S&P 500 inclusion could significantly impact the stock price of Coinbase in the short term.

However, in the long term, the company's earnings power and the growth of the cryptocurrency industry as a whole will play a more substantial role in determining the stock's performance.