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Coinbase IPO - Sell The News

Coinbase has been trading for a little over a week now and it looks like it’s recent public offering was a “sell the news” event triggering a sell off in Bitcoin as well. $COIN began trading on April 14th at $381 and rallied up to $429.65 before closing down on the day at $320. Since then it has most recently traded at $294.50 on Friday the 23rd, losing about -23% of its value since inception.Bitcoin made an all time high of $64,899 on the same day as the offering and proceeded to sell off about -20% to where it sits right now around $52k. 

Two weeks ago we talked about the upcoming $COIN IPO, and as Bitcoin’s price was running up against old highs we contemplated on how an FA driver like this would affect price in the medium term. We postulated whether we would see a “buy the news” or “sell the news” scenario and clearly the latter was the case. Bitcoin did make a new high breaking through the $62k level heading into the Coinbase event but it couldn’t establish any structure above that old high and ultimately the sellers took control, putting in a fractal top and selling off ever since. 

Hindsight is always 20/20 but indeed it now appears that the Coinbase IPO was a perfect liquidity event for whales to mess around with price. Pushing it up to new highs most certainly became an opportunity for them to run the stops of people already short and also suck in new retail longs before taking the market lower. I can’t think of a better example of a “sell the news” FA driver than this event so make sure to take note of how this played out and it will help you in future instances like this. 

Only time will tell how deep this correction in Bitcoin is, but we should at least be considering the technical damage that has been done on the daily chart. There are now large confirmed bearish divergences in MACD and RSI that are in the process of playing out. If price can get back up to the top of the range and into a decent short location then any bearish market structure would be a reasonable place to think about shorting. At the moment we’re a little late to the party for new shorts and 4hr bullish divergences have confirmed in MACD and RSI, possibly setting up a swing trade long for a move back up to the top of the range. At the very least, new shorts are off the table for me at this location. A swing long is a possibility, but I also have a confluence of price targets down around $42k that are important to note. I’m not convinced that this sell off is over yet so any longs taken would need to have strict stop management in place in case price heads lower.

BTC Daily Bearish Divergence

BTC 4hr Bullish Divergence

Investors looking to buy should exercise patience and discipline. Brian’s higher time frame chart gives us an idea of what he’s thinking and long term investors can take note of his RLZ below $30k. Colin’s Pump Chaser Zone is sitting at around $42k and below for more aggressive bullish traders. 

BTC HTF Chart

Overall I’ve not changed my bullish attitude about Bitcoin and I’m kinda thinking this Coinbase sell off is just another correction in what is still a healthy bull market. Yes I’m considering the current bearish outlook and could see lower prices before a bottom comes in, but in my opinion there’s no reason to think we’ve entered a bear market just yet. It seems more probable to me that this event was just another attempt to shake out weak hands and set up another rally. For the moment I think we’re in a range with a $43k bottom and the all time high of $65k. Bouncing around in this range for a while makes sense as it will take some time for the next move to setup. That said, a breakout of the range will suggest a new trend. 

Future Outlook For $COIN

At this point there isn’t a lot of trade data to analyze for $COIN and it’s consistently making lower lows. I keep thinking that it wouldn’t be that big of a surprise to see COIN lose 50% of its opening value before finding a bottom making $190 an interesting level for me to consider investing. Right now it’s trending down and there is no established range or sign of a structural bottom so bulls should really be cooling their jets and waiting for a confirmation of trend change. Of course whatever Bitcoin does will have a direct effect on the price of $COIN and my attention will mostly be on that for now. I’ll take a closer look at $COIN down the road when we start seeing W on a higher time frame.   
 

COIN daily chart

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Happy Trading!
-kevin