Behind the Crypto Frenzy That Triggered Bitcoin’s Selloff

Tracking BTC and COIN could help smooth over their volatility

Editor-in-Chief
Jun 4, 2021 at 10:24 AM
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The journey Bitcoin (BTC) has taken over the past 12 months alone is enough to fill an encyclopedia. Today, with BTC selling off once again, I wanted to dig deeper into its May plunge, which came just after a surge to record highs. This, combined with the overarching cryptocurrency frenzy that hit Wall Street starting in late 2012 and up to the present, has kept Bitcoin -- and cryptocurrency platforms such as Coinbase Global Inc (NASDAQ:COIN) -- ripe in headlines.

In fact, on Wednesday, May 19, Bespoke published a comparison of bitcoin’s drawdowns versus mega cap tech in its Morning Lineup. The largest takeaways included comparing the cryptocurrency’s drawdown to the biggest S&P 500 Index (SPX) stocks, such as Apple Inc (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT). In this, Bespoke found that the average drawdown was significantly larger for bitcoin than the tech behemoths, with the exceptions of Amazon.com (NASDAQ:AZMN) and Alphabet Inc (NASDAQ:GOOG), which were larger or in the same ballpark.

BTC plunged 30% to a bottom of $30,001.51 Wednesday, May 19. This selloff began the week prior, when Tesla Inc (NASDAQ:TSLA) CEO Elon Musk -- an avid investor in the cryptocurrency -- tweeted his company would stop accepting bitcoin as a mode to purchase its vehicles. Per CNBC, this wiped more than $300 billion from the entire cryptocurrency that same day, though Musk later clarified the electric car maker would not be selling its bitcoin holdings.

BTCCotWChart

As bitcoin recovers from Wednesday's plunge to a four-month low, cryptocurrency exchange platform Coinbase Global has been enjoying a jump of its own. The positive price action came after Wedbush initiated coverage on COIN with an "outperform" rating and $275 price target on May 20, calling it a "one-stop shop" for crypto. The firm noted the company has a first mover advantage, as well as more crypto assets on its platform, which enables cryptocurrency to be a part of the payments ecosystem.

As mentioned above, Coinbase Global stock dropped to an all-time low of $208 on Wednesday May 19, in response to bitcoin's sharp selloff. The equity first went public in mid-April, with an initial public offering (IPO) price of $250, but has been trending lower since. Month-to-date, COIN has shaved 22%.

It’s too early to gauge where Coinbase will move from here. However, with Wedbush’s support and a frenzy surrounding cryptocurrency in nearly every media outlet, I wouldn’t be surprised if the equity continued to rebound, regardless of how volatile of a path Bitcoin takes.

COINCotWChart

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, May 23.

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