Back in July, when $COIN touched $212 per share, I sent out a notification on Discord to make the purchase. In my study of Coinbase's price action, I noticed a trend- Coinbase's share price fluctuated in direct correlation to Bitcoin's coin price. I found that to be very odd.
Sure, the value of the coins Coinbase owns may go up or down in value based on the coin price of different cryptocurrencies, but I don't think that is where Coinbase's value lies. You see, Coinbase's value is in their service fees. The entire idea is that Coinbase can be used as an exchange, and being the middle-man allows Coinbase to profit. So, when the crypto-markets go up, Coinbase's cash-flow income accelerates. When markets go down, Coinbase's cash-flow income ALSO accelerates (cash flow, not intrinsic value). It's only when markets are flat that Coinbase is maintaining its value. Of course, there will come an intersection of when crypto markets fall too sharply where the service income doesn't cover the loss of crypto-value (e.g. a drop of 50%-90%). This still is OKAY for the most part, assuming cryptomarkets are here to stay for the next 20-80 years.
I noticed when Bitcoin hit $29K in July, Coinbase was at around $212 per share. Finding it odd, I decided to send out a notification to my Discord community, BigBagsOnly. There is clearly a discrepancy in price and value, and though I was unable to provide any numbers to prove my theory, I was confident/courageous in my analysis.
This was unusual for me because I usually need more reasons to make a swing trade other than a price-action analysis before sending out a notification to the Discord group. I chose to deliberately not make a blog post about it because there is no concrete evidence to support my claim, other than noticing the price actions align between Coinbase and Bitcoin.
You see, I noticed something when trading- once the evidence becomes concrete, it's already too late. The best way to make a quick swing trade is to read between the lines and pick up on tiny inferences based on price action behavior.
Interestingly, Coinbase's earnings report came out. Analysts were expecting a lower growth Q2 compared to Q1, estimating a $2.49 earnings per share. Earnings came out to be more than DOUBLE the estimate, toppling at $6.42 per share. This concretely verified my high-level analysis regarding Coinbase's price discrepancy.
Now, Coinbase sits at $262.50 per share, gaining about 23% since my callout in July. Long term, I think this is a great investment. Cryptocurrencies offer great value to the financial industry. I'm actually very surprised, from a technological standpoint, by how far we've come. The technological revolution is just getting started thanks to crypto and its platform for artificial intelligence to be reliably deployed will change the world today.
If you gained value from this blog-post, please feel free to comment below and let me know!