The headlines are going to be all about the Coinbase (COIN) craze tonight, tomorrow, and through the weekend. There’s no doubt it is an incredibly impressive opening. The stock jumped above $400 only minutes after it began trading. Where it ends the week is anyone’s guess, but the early strength and enormous valuation give crypto supporters a lot of firepower. Crypto critics will no doubt discuss the possible disconnect from reality. I actually think both exist.
I can’t chase near $400. That doesn’t mean you shouldn’t, or you can’t disagree. I simply have a hard time believing we won’t see serious competition in the space soon. Then again, we should have already seen another major player step up. Coinbase will control a core, they will maintain their first-mover advantage for some time, and loyalists will stay true until the end, but what they have isn’t rocket science and they still aren’t to a point without encountering some hiccups. This market cap is too huge for potential competitors to ignore it any longer.
At this point, the stock is entertainment for the viewing. Opportunities might unfold in other names in the space. We saw many crypto-related names take a hit today, likely caused by a move from bitcoin related names directly into COIN.
The trouble here for that sector sits all with COIN now. If money gets moved from say a Marathon Group (MARA) or Riot Blockchain (RIOT) or even Tesla (TSLA) into COIN, then COIN falls, will what’s left of that money go back to the original names or look for a new sector home? Additionally, there will be less to have. Lastly, let’s not forget Tesla is an S&P 500 name now. I see a good bit of our short-term direction being based on COIN right now as silly as that might sound.
Yes, COIN is only one company, one stock, but it’s a mountain of emotion right now. Should we close below the open today, then trend lower tomorrow and Friday, you are going to have a lot of unhappy folks that bought the opening print on the recommendation of others. In the end, they pulled the trigger, but they will still blame, if it happens. They will be angry, and angry traders are not good traders.
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