eyeQ: two powerful tailwinds for Coinbase stock?
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. This time it studies a proxy Bitcoin play.
30th October 2024 10:13
by Huw Roberts from eyeQ
"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
Coinbase
Macro Relevance: 69%
Model Value: $221.11
Fair Value Gap: -0.66% discount to model value
Data correct as at 30 October 2024. Please click glossary for explanation of terms. Long-term strategic model.
At last, its Budget day in the UK and, after months of speculation, we finally get the new Labour government’s economic plan. For investors, the details will be crucial, so today is a day for sitting back, listening and analysing.
While we wait for Chancellor Rachel Reeves, the main talking point in markets today is the strong rise in Bitcoin, which is now over $72,000. It was close to $50,000 as recently as early September.
Crypto tends to be a divisive topic, with sceptics instantly dismissive and proponents almost evangelical in their belief.
eyeQ has no opinion in the debate, but our model shows that Bitcoin typically trades like a speculative tech stock. So, if you believe in a “risk-on” environment that allows markets to rally into year-end, then this crypto bull run could well have legs. In which case, as a UK investor, what are the options?
Coinbase Global Inc Ordinary Shares - Class A (NASDAQ:COIN), the crypto exchange, is a proxy Bitcoin play. And, for the first time in a year, our macro relevance score has just risen over 65%, taking it into a new macro regime.
Given overall macro conditions, Coinbase fair value on our model is $221.11. And that’s very close to where the stock trades, so there is no valuation edge right here, right now. That means we need to monitor model value and, at this time, the trend has been rising – macro momentum is improving.
If this continues, you could see a scenario where crypto investments have a friendly president in the White House and a friendly macro environment. Two potentially powerful tailwinds.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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