We knew yesterday would be an interesting one, and in that respect, it did not disappoint. When it comes to crypto prices, on the other hand, a day that started off looking fantastic ended with a lot of worry. While there is no strong fundamental reason that the direct listing of Coinbase should have had an impact on crypto prices, the reality is that the buzz and the uncertainty around it certainly created volatility. As we digest yesterday’s moves, with a selloff in BTC coming in conjunction with the opening of trading in COIN, and COIN shares seeing a brief rally and then heavy selling for most of the afternoon, we are left with as many questions as answers.

Coming in to yesterday, many traders were questioning whether the recent leg higher in BTC had anything to do with Coinbase. My analysis was that there was probably some increased interest in general as the listing was creating a lot of buzz and that probably brought some stock traders who otherwise didn’t dabble in digital assets to perhaps take some nibbles. But price action yesterday suggested that there might have been at least some effect from private investors who might have held large stakes in Coinbase and were looking to divest.

Every company hopes for positive buzz when they go public. And in a direct listing, where private shareholders sell their shares on the open market to new investors, rather than a traditional IPO where investment banks agree on a price for large blocks of shares with large funds, means that any positive buzz will translate directly into money in the pockets of the investors selling their stake in Coinbase. It’s entirely possible that these private investors worked to push up the price of BTC in the first half of the week in order to help generate more positive buzz about the stock, which would help them sell their shares at a higher price.

The fact that COIN trended down significantly on heavy volume after its debut, along with BTC, leads me to believe that there was more interest in Coinbase stock holders selling out of their stake than there was interest from new investors to buy in. The fact that BTC prices fell at the same time also leads me to believe that at least some of the bid in BTC was related to the Coinbase listing. Now that that is over and done, there are several questions that remain:

  1. How much of the bid in BTC earlier in the week was “real” secular to the Coinbase IPO, rather than just part of the buzz?
  2. Did the private investors in COIN who were looking to monetize their investment get most of their trades done yesterday afternoon, or do they still have a lot of stock left that they are intending to unload?

The answers to these questions will be what determines the path forward in the near term for both BTC and COIN. Regarding the first question, BTC found a battle and then support at 62k at the end of the day yesterday, which is encouraging and supports the idea that at least a sizable portion of the rally in the first half of the week was quite “real”. Strength in ETH and many altcoins also supports the idea that the rally is about a lot more than just buzz over COIN. When it comes to the second question, I will be watching price action in COIN today to get a sense of the balance between new investors buying in and private investors cashing out. If the stock makes any moves lower on heavy volume, that will be an indication that early investors are still aggressively selling. If we don’t see many of those types of moves, then perhaps we’re already through the most tumultuous part of the volatility, which I think would be a positive for both COIN and for BTC.

About Kapil Rathi
Kapil is the Co-Founder and CEO of CrossTower. He is a financial services industry veteran, having previously held senior leadership roles at NYSE, Bats, ISE and Cboe. Prior to founding CrossTower, Kapil was the Chief Operating Officer (COO) at AlphaPoint. His background also includes product and technology leadership roles at NYSE, AT&T, and Aithent. Kapil’s accomplishments include managing four equity options exchanges at Cboe, launching a new options exchange at Bats, and building multiple innovative trading products at ISE. Kapil holds an MBA from Fordham University.

 

 

CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.

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