The rising bitcoin price, as crypto regulation advances in Congress, and a new 65% price target boost from Bernstein continued to propel Coinbase Global higher on Wednesday morning.
Bernstein analyst Gautam Chhugani called Coinbase "the most misunderstood company in our Crypto coverage universe," adding that it stands to benefit from Genius Act stablecoin legislation that cleared the Senate last week and newer legislation that aims to ensure a regulatory structure under which digital assets can flourish.
Momentum for the Digital Asset Market Clarity Act helped the bitcoin price, even as the dollar edges higher and the gold price is flat on Wednesday.
Coinbase's 'Multiple Growth Levers'
COIN stock's big rally initially seemed tied to an updraft from key stablecoin partner Circle Internet Group, which took off last week following Senate passage of the Genius Act.
But COIN has caught a second wind since CRCL cooled after rocketing more than 250% from its June 5 IPO price.
Bernstein's Chhugani wrote: "Despite multiple growth levers, consensus remains bearish on the largest crypto universal bank," according to The Crypto Times.
Chhugani highlighted Coinbase's status as the only crypto company in the S&P 500. COIN was added to the S&P 500 on May 19, replacing Discover Financial Services after its acquisition by Capital One Financial.
Coinbase "dominates U.S. Crypto trading market, runs the largest stablecoin business amongst exchanges, dominates institutional Crypto, acquired the largest global crypto options exchange," Chhugani wrote.
He also highlighted recent news that Coinbase is getting ready to launch perpetual futures as it expands its cryptocurrency business. Perpetual futures allow traders to speculate on the future price of bitcoin or other cryptocurrencies without needing to buy the underlying asset, since there is no expiration date.
'Crypto Renaissance'
In a June 11 note initiating coverage on Coinbase with an outperform rating, William Blair analyst Andrew Jeffrey wrote that crypto's "time on the fringe is ending, replaced by an era of consistent regulation and expanding use-cases with the ultimate potential to supplant the traditional global financial system."
Jeffrey added that William Blair views Coinbase "as the best way for growth investors to participate in a crypto renaissance."
The research note also delves into the relationship between Coinbase and Circle. Coinbase generates about 15% of net revenue from stablecoin-related income through its Circle partnership, he wrote. A possible change in the agreement at Circle's discretion is among the risk factors listed for COIN.
Jeffrey notes that Coinbase's stablecoin revenue has grown in tandem with the market capitalization of Circle Internet's USDC stablecoin. "We anticipate that growing regulatory clarity and a proliferation of use-cases will be important drivers of USDC growth."
COIN, Bitcoin Prices Rise
Coinbase stock rose 1.2% to 348.83, pulling back after hitting 369 in early Wednesday stock market action. On Tuesday, Coinbase led all S&P 500 stocks with a 12.1% gain.
Shares are already too extended to chase at the moment, closing 28% above the 21-day exponential average on Tuesday. The best recent chance to buy came as COIN flashed an early entry on June 18 as it rallied above its 21-day average and cleared near-term resistance at 277.01.
COIN stock is part of the flagship IBD 50 list of leading growth stocks. Circle Internet is on the watch list for the IBD Leaderboard portfolio of elite stocks.
CRCL is sliding 9% to 202.79 early Wednesday, after peaking just below 300 intraday on Monday.
The bitcoin price has climbed 2.1% over the past 24 hours, reaching $107,807, according to Coindesk. Bitcoin mining plays TeraWulf, Iren and Hut 8 climbed around 3.5% to 4.5%.
A stock's average true range, a metric available on IBD's MarketSurge, reflects its daily volatility. Higher numbers raise the risk of a shakeout that can trigger sell rules. Current market conditions allow for buying stocks with pretty high ATRs of up to 8%, but investors shouldn't focus on high-octane names alone. Coinbase has a 6.4% ATR, fairly elevated but not extreme.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
