Shares of Coinbase Inc. seesawed lower Friday, following the previous session’s record rally, which was fueled by increasing optimism that the cryptocurrency exchange will prevail in a lawsuit filed by securities regulators.
The stock
COIN,
fell 0.7% in midday trading. It had run up as much as 6.9% soon after the open to an intraday high of $114.43 — the highest price seen since Aug. 4, 2022 — and then fell as much as 2.1% before paring some losses.
On Thursday, the stock rocketed 24.5% — the biggest one-day gain since Coinbase went public in April 2021 — after a judge’s ruling in a case involving cryptocurrency tokens was seen as a positive for Coinbase.
The ruling fueled optimism that Coinbase will also receive a favorable ruling in a lawsuit in which the Securities and Exchange Commission charged the company with running an unregistered securities exchange.
“We believe this outcome should moderately de-risk the regulatory pressure on the stock,” Needham analyst John Todaro wrote in a note to clients.
Also read: A ‘wild outcome’: How the Ripple decision scrambles the battle between the SEC and the crypto industry
Todaro raised his price target on Coinbase’s stock by 71%, to $120 from $70, and reiterated the buy rating he’s had on the stock for the past two years.
The stock’s rally on Friday comes as bitcoin
BTCUSD,
fell 0.6%. Correlation between the stock and the cryptocurrency has historically been very high, meaning they usually move in tandem, but that has correlation has dropped in recent months.
Since Coinbase went public, the correlation coefficient between the stock and bitcoin has been 0.94, according to a MarketWatch calculation of FactSet data. A correlation of 1.00 would mean they moved perfectly in tandem.
The correlation has dropped to 0.66 over the past months, however, and to 0.60 year to date.
Coinbase shares have tripled year to date, up 200.3%, while bitcoin has rallied 88.3% and the S&P 500
SPX,
has gained 17.5%.
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