Shares of cryptocurrency exchange Coinbase (NASDAQ:COIN) fell 5.1% during the morning session after stocks exposed to the crypto space declined amid market momentum. crypto has weakened following a strong rally that began in the weeks leading up to the November 2024 election. Investors were hoping for more favorable regulation under a new administration. Although the victory of the new Trump administration was initially perceived positively, the market now seems to be looking for new catalysts to maintain its momentum. Additionally, profit-taking by investors could contribute to the slowdown. Notably, Bitcoin, the largest cryptocurrency by market capitalization, fell more than 10% after hitting an all-time high of $106,000 on December 16, 2024.
Shares closed the day at $268.16, down 3.8% from the previous close.
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Coinbase shares are extremely volatile and have seen 79 moves greater than 5% over the last year. In this context, today’s development indicates that the market considers this news significant, but not as something that would fundamentally change its perception of the company.
The previous big move we talked about happened 12 days ago, when the stock gained 6.1% following news of major indexes rising, with the Nasdaq up 1.4%, while that the S&P rose 0.7% after the Bureau of Labor Statistics released the Consumer Price Index. (CPI) for November 2024, in line with expectations. The CPI rose 0.3% from the previous month, while headline inflation rose 2.7% year-over-year, moving closer to the Federal Reserve’s 2% target, but not yet there. Market reaction suggests investors interpreted the report as a signal for the Fed to cut rates, bolstering expectations of a 0.25% cut at the December 2024 meeting.
As a reminder, the value factor of a stock is the sum of its future cash flows discounted to today. The result of lower interest rates, all else being equal, is higher stock market valuations. This is especially true for higher-growth stocks, such as those in the technology sector, whose current value is more dependent on cash flow over many years.
Coinbase is up 71.8% year-to-date, but at $269.46 per share, it’s still trading 21.6% below its 52-week high of $343.62 since December 2024 Investors who purchased $1,000 worth of Coinbase stock during the April 2021 IPO would now be looking at an investment worth $820.95.
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