Published: December 11th, 2024
A note to investors from investment bank and asset management firm Needham & Co says crypto traders are flocking back to Coinbase, driven by BTC’s brief jump past USD 100,000, rising volatility, and a mini altcoin boom.
On Monday the firm set a new price target for Coinbase stock (COIN), lifting it to USD 420 from USD 375 while continuing to rate it a firm “buy”. Needham analysts highlighted Coinbase’s surging December trading volumes, which are ‘on course for a new historic high.’
Q3 figures from Coinbase for October list its total trading volume at USD 183 billion, close to 20 per cent less than in Q2. The San Francisco-based firm said the fall was due to a cooling Bitcoin market as BTC dipped under its March high of USD 73,800. Coinbase also noted the past Summer’s unfavorable economic conditions.
Needham has higher expectations for Q4 and sees Coinbase’s total trading volume rising to USD 435 billion. If the forecast comes true, that would amount to a 135 per cent increase in total trading volume over a three-month period.
One indicator pointing to rapid growth is the ratio between Bitcoin’s market cap and the crypto market’s entire value, which indicates that retail crypto traders are returning in big numbers. Data from CoinGecko shows the ratio has dropped from 59 per cent in November to 51 per cent currently.
Needham analysts think the figure could fall even lower to 45 per cent, though the firm warns that BTC's declining dominance could be a portent of market euphoria, which often precedes a crash.
In early November, Coinbase’s stock price rose sharply. Data from Google Finance pegged the San Francisco firm’s share price at USD 334.3 on Monday, 11th November, placing it up 60 per cent over the previous 30 days.
COIN leapt by 20 per cent over the previous 24 hours, putting it within reach of the stock’s debut price of USD 381, hit three years ago when the company first went public during the last BTC bull run.
Data from TipRanks showed that analysts were looking for a price target of close to USD 380 over a the coming 12-months, with nine experts calling COIN a ‘buy’ while eight label it a ‘hold’
The USA's leading crypto exchange, Coinbase makes it easy for novice and experienced traders to buy and sell major crypto coins and tokens. It also provides custody services to major spot Bitcoin ETF issuers, including Wall Street giants like BlackRock.
On the back of Donald Trump's resounding US election win in November, expectations for a crypto-friendly regulatory period sent the stock into liftoff mode.
The stock got received an earlier boost in June 2024 when Coinbase said that it had added AI capability, implementing an advanced machine learning (ML) model capable of predicting activity spikes and automatically scaling network resources to address them. The exchange hoped it would prevent the downtime issues that have often plagued it during traffic surges and extended periods of volatility.
‘Attempting to scale up resources when traffic is already underway is difficult and usually too late,’ Coinbase wrote in a blog post announcing the change. ‘In response to past outages and slowdowns we’ve developed a scaling solution that uses machine learning to anticipate rising traffic and automatically adjust, initiating a scale up before any surge in activity hits.’
Coinbase says its ML model has already helped smooth the trading experience during recent bouts of crypto market volatility.
‘As traffic ballooned, our scaling solution had already responded, doubling every few hours and staying one step ahead of peak traffic,’ Coinbase said. ‘The solution automatically scaled up and down in sync with trading and transaction volume. That continued until volatility decreased and no more scaling was required.
The model is designed is to give Coinbase at least an hour's lead time on any traffic surge. The exchange experimented in the past with a forecasting model that tried to anticipate traffic levels 60 minutes into the future. However, lag time in processing the underlying metrics made the tool ineffective.
The company says its new model is built to achieve a balance between avoiding missed spikes and reducing false alerts. It re-thought the problem and decided to focus on longer-term classification of activity types and market signals, including price fluctuations in major coins like Bitcoin and Ethereum.
In June, Coinbase, Ripple and VC Andreessen Horowitz (a16z) made moves to reduce a different kind of risk when they announced donations of USD 25 million each to Fairshake, a political action committee (PAC) dedicated to advancing crypto-friendly policies in the upcoming US general election.
The PAC's war chest now totals roughly USD 160 million, ready to be splashed out on candidates who support digital assets. That makes it one of the biggest stockpiles of campaign cash in American politics.
Fairshake and its affiliate PACs have been combing through US state primaries to identify candidates for the Senate and House of Representatives who've either been crypto-curious in the past, or let it be known recently that they would be open to considering pro-crypto positions.
The committees have cumulatively handed some otherwise low-profile politicians millions in campaign support. Given its size, Fairshake is considered a ‘Super PAC,’ with pockets deep enough to fund national political advertising spots for (or against) specific candidates. PACs are restricted, however, from playing a direct role in the candidates' official campaigns.
‘Our mission is to promote economic freedom by expanding the adoption of cryptocurrencies,’ Coinbase said in a statement announcing the donation. ‘We have been deeply engaged in policy discussions with the House and Senate with the aim of guiding crypto legislation and informing members about the issues. We see growing the number of pro-crypto decision makers in Washington as a vital activity.’
