In a remarkable turnaround, Coinbase (NASDAQ:COIN) shares jumped 8.9% yesterday. In the pre-market for today, the stock is up another 9%. This swift reversal comes after the share price fell following disappointing results earlier this week. But given the move I’m seeing at the moment, should I jump in and scoop up some Coinbase shares?
Assessing the fall before the bounce
First, I think it’s important for me to look at the long-term picture. Coinbase shares are down 78% over the past year. It’s been a grind lower for the crypto exchange platform, that went public with a lot of hype back in 2021.
Despite the buzz around the IPO, Coinbase has been caught in a period of time when the crypto market in general has struggled to perform. Further, since the end of last year, financial markets in general have been very choppy. Rising interest rates and high inflation have caused investors to look for safer homes for their money, with crypto not ticking this box.
The move lower in Coinbase shares has been compounded by financial results. For example, consider the latest report from earlier this week. Trading volume for the quarter was $309bn, down from $335bn in the same period last year and $547bn in the preceding quarter.
Monthly transactional users also fell from the preceding quarter. Q1 users were 9.2m, a decrease of 2.2m or 19% compared to Q4. This hurt Coinbase shares as a business trading less due to fewer users, isn’t a recipe for success.
End-of-week jump
Despite the bad news, Coinbase shares did surge yesterday and are likely to post strong gains again today. There are a few things I can put this down to.
Firstly, the crypto market in general had a rebound in prices. The Bitcoin price is up 11% in the past 24 hours, with other coins posting even larger gains. Naturally, there’s some correlation between the prices of these coins and the Coinbase share price.
News also broke yesterday that well-respected investor Cathie Wood has purchased more Coinbase shares for her flagship fund. This seems to add credibility for some who were wondering whether investing now would be a smart move.
Finally, the share price was trading at all-time lows on Thursday. When a stock hits such lows, especially with a sharp move lower, it can be driven up quickly as people rush to buy it at a cheap level.
My thoughts on Coinbase shares
As the quarterly report noted, “you can expect volatility in our financials, given the price cycles of the cryptocurrency industry.” I do think that crypto is going to be part of our future, and that the industry will go through cycles of good/bad times. Currently, it’s definitely a bad time. But as a long-term investor, I feel this is the time for me to take advantage and buy.
On that basis, I’m seriously considering buying some Coinbase shares now.