By Shares of Coinbase Inc. experienced a slight decline on Friday, following a previous session’s impressive surge, which was driven by growing optimism surrounding the cryptocurrency exchange’s ongoing lawsuit with securities regulators.
The stock (COIN) fell 0.7% during midday trading. It initially soared as high as 6.9% after the market opened, reaching an intraday high of $114.43, the highest price since August 4, 2022. However, later on, it experienced a 2.1% decline before recovering some of the losses.
On Thursday, the stock had a remarkable 24.5% surge, marking the biggest one-day gain since Coinbase’s public debut in April 2021. The surge was a result of a favorable ruling in a case related to cryptocurrency tokens, which was seen as a positive sign for Coinbase.
This ruling has sparked optimism among investors regarding a potential favorable outcome for Coinbase in another ongoing lawsuit, in which the Securities and Exchange Commission has charged the company with operating an unregistered securities exchange.
Needham analyst John Todaro expressed confidence in Coinbase’s future, stating, “We believe this outcome should moderately de-risk the regulatory pressure on the stock.” In fact, Todaro raised his price target for Coinbase’s stock by 71%, from $70 to $120, while maintaining his buy rating that has been in place for the past two years.
Interestingly, Friday’s rally in Coinbase shares occurred simultaneously with a 0.6% decline in Bitcoin’s value. Historically, there has been a strong correlation between Coinbase’s stock and the price of Bitcoin, indicating a tendency to move in sync. However, this correlation has weakened in recent months.
According to FactSet data, since Coinbase went public, the correlation coefficient between the stock and Bitcoin has been 0.94, with a correlation of 1.00 representing a perfect alignment. However, this correlation has dropped to 0.66 in recent months and to 0.60 year-to-date.
While Coinbase shares have skyrocketed by 200.3% year-to-date, Bitcoin has also experienced a notable rally of 88.3%, while the S&P 500 has gained 17.5%.
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