Coinbase Global Stock Forecast: After COIN plunges 14%, expect another 22% decline

Coinbase Global (COIN) stock haemorrhaged throughout Thursday's session after the United States Securities & Exchange Commission (SEC) leveled a $30 million fine against rival crypto exchange Kraken for allegedly creating an “unlawful offer and sale of securities" through its crypto staking program. Though Coinbase management denied its own staking product was similar or was in violation of the SEC, the market saw things differently.

COIN stock plunged 14.1% to $59.63 on Thursday and then tumbled down to $59 even afterhours.

Coinbase Global stock news: Kraken fine hits close to home

Coinbase was quick to strike down any comparison with Kraken. Coinbase Chief Legal Officer Paul Grewal told Bloomberg that his company's staking product would continue as normal.

“Coinbase’s staking program is not affected by today’s news,” Grewal said in a statement. “What’s clear from today’s announcement is that Kraken was essentially offering a yield product. Coinbase’s staking services are fundamentally different and are not securities.”

CEO Brian Armstrong took a different tact when he blasted the SEC on Twitter for "regulation by enforcement":

Coinbase suffered its worst rout since July of last year when it was reported that US regulators were determining whether it had violated the law by allowing investment in unregulated securities. A total ban on staking in the US would significantly effect Coinbase's business as staking revenues made up 11% of net revenue in the most recently reported quarter.

Coinbase will report its calendar fourth quarter results on February 21. Wall Street is expecting a GAAP loss of $-2.51 per share, and an adjusted per share loss of $-1.41, on revenue of $593.6 million.

Coinbase Global stock forecast

The reason why Coinbase stock is likely to fall further are three-fold. First, Thursday's plunge and subsequent continued sell-off in the postmarket shows the real fear felt by traders. Though COIN stock has begun to enter the realm of value investors, Thursday's plunge demonstrates that a large quadrant of shareholders do not bear diamond hands. The most important point on the chart is the break of $62. That price level supported COIN stock in September and October of last year on multiple occasions, demonstrating its significance. The premarket here on Friday has also seen COIN price move below the 21-day moving average, which had supported the price on Thursday. Breaking these two support levels tells us that COIN is unready to consolidate here.

The second confirmation is that the Relative Strength Index (RSI) has been strongly in overbought territory in the first week of February. As happened in early August of 2022, this typically ends with a sharp sell-off and stubborn bear market.

The third reason involves the macro picture. This week's equity market has turned lower as market participants have begun to understand that January's rally got out of hand. Federal Reserve Chair Powell's statements mid-week proved resonant for bulls who figured that interest rates were likely to come down soon. Instead, Powell said he expected rates to be high for some time to ensure a healthy price level equilibrium was reached. Russia's new offensive in Ukraine is also making February look unsafe for risk assets. For all of these reasons, expect COIN stock to fall back to $46 for support, which would entail a 22% decline from here.

COIN daily chart