Bitcoin to Boost Coinbase ($COIN) as Robinhood ($HOOD) Flops

BITCOIN OUTLOOK: WILL COINBASE ($COIN) BEST ROBINHOOD ($HOOD)?

• Bitcoin price action (BTC/USD) is aiming higher thanks to improved crypto outlook
• Coinbase ($COIN) could benefit from returning demand for major cryptocurrencies
• Robinhood ($HOOD) closed nearly -9% below its opening IPO price of $38.00/share

Bitcoin is up over 12% on the week with BTC/USD price action seeing an influx of demand thanks to another solid defense of the psychological $30,000-level. The “B Word Conference” paneled by Elon Musk, Cathie Wood, and Jack Dorsey last week seems to have shored up crypto investor confidence enough to send Bitcoin recoiling higher off this established floor.

BTC/USD has struggled to maintain upward momentum over the last two trading sessions, however, as the crypto contends with resistance around the $40,000-price level. Headwinds also coincided with Amazon ($AMZN) denying potential Bitcoin adoption. Nevertheless, in consideration of updated Fed guidance and the probability that the US Dollar continues to broadly weaken, outlook for Bitcoin is turning rosy again.

$COIN – CHART OF COINBASE STOCK PRICE VS BITCOIN

Chart by @RichDvorakFX created using TradingView

This could see crypto exchange Coinbase ($COIN) head higher too. Coinbase stock price has dropped nearly -40% from its trading debut back on 14 April and has largely followed the direction of Bitcoin in lockstep. The 10-day correlation of 0.83 highlights this strong positive relationship between $BTCUSD and $COIN. As such, with Bitcoin appearing to have put in a bottom, this may be a bullish ‘tap on the shoulder’ for Coinbase to start clawing back recent downside. That might provide $COIN with an opportunity to outperform IPO-cursed Robinhood ($HOOD).

$HOOD – CHART OF ROBINHOOD STOCK PRICE ON IPO DAY

Chart by @RichDvorakFX created using TradingView

The Robinhood IPO today was rather disappointing as $HOOD closed nearly -9% below its opening price of $38.00/share. When thinking about what an initial public offering is at its core, one could easily argue how it is an exit strategy for private companies to cash out of (i.e. sell) their business that is maturing. On that note, there have been many instances throughout history where a company’s IPO coincides with the peak of its respective industry.

For example, the Coinbase IPO aligned with the top in Bitcoin earlier this year. So too did the Glencore IPO with the top in industrial metals back in 2011 as did the Blackstone Group IPO with the top in major stock indices back in 2007. Bringing focus back to the Robinhood IPO, the case can be made that retail trading activity – and Robinhood’s business – might be reaching peak growth. This might see $HOOD continue to face downward pressure amid price discovery in the wake of its IPO. Even if this scenario is wrong and Robinhood pushes above its IPO price, I still think the odds are more likely that $HOOD lags $COIN.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight