It’s been a bumper week for Coinbase (NASDAQ:COIN) following major news about a partnership with asset manager BlackRock. Coinbase shares closed Thursday just shy of $89, marking a 47% jump from the opening price on Monday. After being in the doldrums for several months, is this the catalyst for a broader rally?
Big news with BlackRock
The main driver behind the jump this week came from a news release that Coinbase would provide crypto services to BlackRock. That business is one of the largest asset managers in the world, and services a wide range of clients. A subset of this is the institutional clients group, made up of other professional funds that use BlackRock as a custodian for their assets.
Under BlackRock’s Aladdin platform, these clients will be able to access crypto trading and similar services, provided by Coinbase. This deal is a win for both parties, in my opinion. Coinbase will benefit from more clients and higher transaction activity. BlackRock will benefit from being able to retain existing clients and deepen its relationships via this new offering.
I think this is a bigger win for Coinbase though. The company has been trying for a long time to get validation that it’s a secure way for investors to buy and sell crypto. In getting this partnership, it adds a massive tick in this box.
Coinbase shares bouncing at the right time
The deal comes at a great (and much needed) time for the firm. The share price is down 65% over the past year, even after taking into account the surge this week.
As a crypto exchange, the company is sensitive to the sentiment around Bitcoin and other major cryptocurrencies. When the coins fall in value, fewer are traded. Some investors sell out and remove cash holdings. Either way, it’s not good news for the business.
Bitcoin has halved in value this year, with other coins in a similar boat. It’s also been interesting to see that crypto hasn’t been as much of a hedge against falling stocks as some thought it would be. I think this is another reason why Coinbase shares have suffered.
Brining this all together, the firm desperately needed some good news to share with investors. It has delivered it at the right time, with the share price showing how much it means.
Should I buy now?
Even with the rally this week, I think it has legs to keep rising. I’m a firm believer that the crypto bear market won’t last forever. I can’t predict whether this means a recovery in six months, a year or longer. But as a long-term investor, it makes sense to get involved now so that I’m positioned for the move. When it happens, Coinbase should be poised to take advantage via a broad customer base and generous transaction fees.
Based on that, I’m seriously considering buying Coinbase shares for my portfolio now.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
