Actions in the exchange of cryptocurrency classified as Nasdaq Coinbase (COIN) Quickly approach an overvaluation threshold, 10x Research, led by Markus Thielen, said on Friday. Thielen recommends a pairs trade which includes a short position in the room and a simultaneous long position in Bitcoin
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In a note sent to customers, Thielen explained that the fundamentals of Coinbase, traditionally volumes, have not followed the rhythm of the rally of stock prices, which quickly approach the overvaluation threshold, a classic configuration for a “tactical inversion”.
“Although Coinbase has not completely violated the overvaluation threshold of + 30%, it approaches quickly, and although it is one of the rare high-quality crypto games, its current premium suggests the risk of upperformance to come,” said Thielen. “Traders who seek to capitalize on this dislocation could consider switching to long Bitcoin while interrupting Coinbase, or using options by selling a call of parts and buying a BTC call to express the same view with a defined risk.”
Fundamental disconnection
According to the linear regression model of 10x, 75% of the action of the Coinbase equity price is explained by the price and the trading volumes of Bitcoin. This means that only 25% of the action of corner prices is directed by other factors, such as the potential impact of the IPO of Circle or the developments of crypto and macro.
In quantitative terms, this suggests that the corner price tends to increase by $ 20 for each move $ 10,000 in BTC and $ 24 for each increase of $ 100 billion in the negotiation volume.
The recent price action suggests that the rally is rally compared to the price of bitcoin and trading volumes. Coinbase shares have jumped 84% in the past two months, while Bitcoin has only increased by 14%.
“Not only is this bonus extended from the current Bitcoin price, but it also seems disconnected from the trading volumes of underlying crypto, which oscillate around $ 108 billion,” said Thielen. “This rare deviation suggests that the coinbase assessment is extended and vulnerable to average reversion.”
The report indicates that other factors – the IPO of Circle on June 3, the Stablecoin Bill “Engineering” of June 17 and the frenzy of purchase of Korean investors – seem to have been assessed.
“While this momentum cools, obvious in the recent reversions of Circle, Kakaopay and Metaplanet, there is an increasing risk that Coinbase actions could also approach a local summit,” said Thielen.
