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BlackRock sees Coinbase (COIN) Stock Rally

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A silver lining has appeared for Coinbase’s stock in the form of a strategic partnership that could open up institutional investor access to cryptocurrencies. Coinbase (NASDAQ: COIN) is a cryptocurrency exchange based in San Francisco, with a global reach throughout more than 100 countries. The announcement, made on August 4, was the platform struck a deal with BlackRock’s investment technology platform to connect to Aladdin. This may well be one of the most significant in the company’s 10-year history. 

Aladdin is a system that supports the global investment industry, and its partnership with Coinbase will open the door to cryptocurrencies for institutional investors on a scale that’s never been seen before. Access will initially be limited to bitcoin, but other assets like ether and various altcoins are certain to arrive further down the line. 

The announcement has sparked a remarkable reversal of fortunes for Coinbase and its stock, which has been stuck in a perpetual decline since late November 2021. Hampered by the crypto market slowdown and falling trading volumes, COIN has been forced to endure high quantities of investor sell-offs, with Cathie Wood’s Ark Investment Management dumping 1.4 million shares in the platform in late July.

Despite the cryptocurrency landscape shrinking significantly in recent months, some institutional investors remain unperturbed by the downturn, and Coinbase’s BlackRock is likely to empower more investors to seriously consider adding crypto exposure to their portfolios. 

“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships.

In the immediacy of the news, Coinbase shares climbed by 44% before settling back down to gains of around 15%. Whilst this shows a capacity for exponential growth based on positive news and strategic partnerships, the stock is still struggling significantly amidst a wider cryptocurrency market downturn. 

Since its April 2021 direct listing, COIN only briefly climbed above its initial listing price on November 12, 2021 – two days after bitcoin last breached its all-time high value. 

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Since their respective peaks, bitcoin has fallen 68% from its all-time high whilst COIN is more than 76% adrift – illustrating how crypto-exposed stocks are extremely dependent on the fortunes of cryptocurrency performance. 

Good News Amid Investor Sell-Offs

The announcement of Coinbase’s partnership with BlackRock comes just days after it was confirmed that Cathie Wood’s Ark Investment Management sold 1.4 million shares in COIN amidst a flurry of negative news cycles surrounding the company. July saw Coinbase face up to an SEC probe into assets that the commission believed could be regarded as securities, shares in COIN tumbled 20%

However, the SEC’s probe is unlikely to cause lasting damage to Coinbase, and investors will have reason to be optimistic about the prospect of large institutional investors utilising Coinbase as their medium for buying and selling crypto assets. 

So, after more than a year of struggles as a public company, could Coinbase finally be a buy for investors? Analysts suggest that the answer could come as it becomes clear which line of resistance the stock settles at. 

Emphasising Caution Alongside Optimism

According to financial journalist, Bret Kenwell, COIN is not quite out of the woods just yet. 

“If the price action was bullish, the stock would have reclaimed prior resistance and used it as support to push even higher,” Kenwell explained. “The stock in fact ramped considerably higher, so deflating it a bit only makes sense. But the bulls would have liked to see it hold above the psychologically relevant level of $100, as well as the 21-week moving average.”

Kenwell highlights the $79 to $82 price range as a key area to build from for Coinbase to continue its bullish trend should confidence in the stock hold strong and investors continue to see the long-term potential of the partnership with BlackRock and continue to buy in. 

Here, it’s worth noting that Coinbase’s reliance on the wider cryptocurrency market will play a key role in its stock market recovery, but with the platform becoming a brand new hub for institutional trading, the company may have itself to thank for future improvements in trading volumes.

Alongside COIN’s bid to pave the way for more institutional investment, the ever-competitive fintech landscape has forged an ever-evolving environment populated with stock trading platforms that also offer exposure to crypto assets – allowing retail investors an unprecedented level of accessibility to crypto also.

Although it’s been a rough journey for Coinbase, the announcement of the company’s partnership with BlackRock may ultimately act as a turning point for the embattled stock. Still, in an ecosystem that’s as volatile as crypto, it’s certainly worth emphasizing caution alongside optimism.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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