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Why Coinbase Stock Popped, Then Dropped Today

By Chris MacDonald – Jan 4, 2022 at 3:13PM

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Crypto trading volumes are all over the place.

What happened

Popular cryptocurrency-exchange Coinbase Global (COIN 2.31%) has seen some significant volatility today. This morning, Coinbase surged more than 3% before 10 a.m. ET, along with the broader market. However, market-driven volatility among many high-growth names, particularly key components of the Nasdaq and S&P 500, have driven markets lower this afternoon. 

As of 2:15 p.m. ET, Coinbase investors have seen a 3% gain turn into a 1.6% loss, good for a swing of nearly 5% on the day.

Blue arrow going up next to red arrow going down.

Image source: Getty Images.

So what

Momentum in the high-risk world of cryptocurrencies has actually outperformed risk assets in the stock market today. That said, the overall trajectory of most top tokens has followed suit, with the broader crypto market declining approximately 0.6% as of 2:15 p.m. ET.

A rotation out of higher-risk assets and into more defensive, safe-haven names appears to be taking hold in the stock market today. For top cryptocurrencies, capital outflows have continued, with a slow-and-steady decline continuing into early January. 

For crypto-trading platforms such as Coinbase, lower transaction volumes are a key headwind investors don't like to see. Capital flows into the crypto sector have driven significant growth for Coinbase over the past year. A slowing of growth would be very detrimental for Coinbase stock, and it appears some investors and traders are speculating this could be the case for Q4 and Q1, as well.

Now what

Coinbase is one of a few high-growth names that remain significantly off their highs. The company posted disappointing results this past quarter, and investors don't seem too bullish about Coinbase's upcoming report.

That said, there's always another rally in the crypto world -- historically, at least, this has been the case. Should sentiment turn bullish and momentum turn around, Coinbase may be attractive at these levels.

That said, it appears this risk-off rotation has some legs. Accordingly, I'm happy to watch Coinbase's volatility from the sidelines right now.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns and recommends Coinbase Global, Inc. The Motley Fool has a disclosure policy.

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