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How Coinbase stock price shot up 40% last month

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This article was originally published on All figures in US dollars unless otherwise noted.

What happened

Shares in Coinbase Global (NASDAQ: COIN) rose 40.4% in October, according to data from S&P Global Market Intelligence. The cryptocurrency broker followed suit as many of its most popular digital tokens made massive gains. For example, market-leading cryptocurrency Bitcoin (CRYPTO: BTC) rose 48.7% last month while the blockchain-based smart contracts platform ether (CRYPTO: ETH) achieved a return of 51.4%.

so what

Both Ethereum and Bitcoin set new all-time highs again after a collapse in the crypto market from May to September. Cryptocurrencies are still extremely volatile, but the market has taken many steps towards a calmer and more predictable future.

Market-enhancing improvements include the introduction of Bitcoin as an official currency of El Salvador, regulators in the US and elsewhere considering how to create a regulatory framework for digital assets, and the launch of the first Bitcoin-centric exchange-traded fund. the ProShares Bitcoin Strategy ETF (NYSEMKT: BITO) does not directly own bitcoin tokens but has positions in bitcoin futures. The ETF is up 7.7% since inception on October 22nd.

As for Ethereum, this digital asset performed a major technical update on its blockchain network. An Ethereum futures ETF is coming soon, and rising interest in Ethereum-based decentralized financial systems is driving a surge in real-world Ether transactions.

All of this is good news for Coinbase. The company charges a fee for every cryptocurrency transaction it manages, so increasing trading volume is good news for the company’s sales and bottom line. Coinbase’s total trading volume was above average in October and trended even higher in November, according to data from CoinGecko.

What now

The future value of Coinbase depends on wider acceptance of cryptocurrencies in general and increased crypto trading activity in the American market in particular. The company will announce results for the third quarter, which ended October 31, on Tuesday evening.

If you are interested in the cryptocurrency market but are not ready to take direct positions in any of the individual digital coins, Coinbase can offer a safer middle ground. This stock does not depend on the wealth of a single cryptocurrency, but on the health of the crypto market as a whole. If a better idea comes up to overthrow Bitcoin or Ethereum, Coinbase will happily pocket the trading fees when investors move on to the hot new thing. The biggest risk to Coinbase shareholders – and I admit it is a significant risk – is that the company would suffer if the whole cryptocurrency and blockchain asset revolution fell apart and never really became mainstream will.

The gains in October offset Coinbase’s falling share prices in the spring, and the stock is now seeing a single-digit positive percentage for the first time since going public in April. Tuesday’s report is likely to trigger a large move in the stock, although the direction of that move remains to be seen. Cautious investors may want to wait for a price drop before taking a position in this highly-rated stock, while growth-minded traders might argue that Coinbase may never be this affordable again.

This article was originally published on All figures in US dollars unless otherwise noted.

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