Coinbase Stock Could Drop 20% in July Despite SEC Loss Euphoria

Key Takeaways

• The Coinbase stock price closed the week at nearly 35% profits.
• COIN rose primarily due to Ripple’s legal win versus the US securities regulator.
• The stock, however, risks undergoing sharp bearish moves in the coming weeks.

YEREVAN (CoinChapter.com) — Coinbase (COIN) has recorded its best week since January 2023 after rising sharply in the session.

Why is Coinbase Stock Up?

The COIN share price rose nearly 35% in the week ending July 14, hitting an 11-month high of around $114.50. Its gains mirrored similar upside moves in the broader crypto market, helped by the growing euphoria about Ripple’s legal win against the US Securities and Exchange Commission (SEC).

The SEC had accused Ripple of conducting the sales of illegal securities in the form of XRP (XRP) tokens. However, the federal judge ruled that the XRP sales across public crypto exchanges did not break securities laws.

In June, the SEC filed a lawsuit against Coinbase, accusing the crypto exchange of listing unregistered security tokens. But after Ripple’s win, most traders became sure the ruling would help other tokens escape the SEC’s regulatory blockade, leading to Coinbase’s win against the US regulator.

Overall, the COIN shares have rebounded nearly 150% since the SEC lawsuit against Coinbase, signifying most traders expect the exchange to beat the regulator in court.

Why COIN Price Could Drop Ahead

Despite solid fundamentals, the Coinbase stock price risks dropping sharply in the coming weeks.

Overbought Risks

COIN’s weekly relative strength index (RSI) will likely cross above or tread around ’70’ in the coming weeks, leaving the stock at its most “overbought” state on record. An overbought RSI typically prompts the price to correct lower or consolidate sideways.

But, in COIN’s case, the likelihood of a price correction is higher. That is primarily because it has retested a strong fractal resistance near $106.50. In August 2022, this level prompted a strong bearish reversal, leading to a 73% drop in COIN prices afterward.

Suppose the fractal repeats in July. Then, COIN’s next downside target on a bearish reversal comes to be around $85, down 20% from current price levels.

Cathie Wood is Dumping

Media sources note that the funds of Ark Invest, the investment management company head by Wall Street veteran Cathie Wood, have dumped COIN shares ahead and after the stock’s price rally. In other words, even Wood sees the Coinbase stock going down in the future.

Conversely, some analysts anticipate Coinbase will continue its bullish reversal run in 2023, with veteran Peter Brandt citing the formation of an inverse-head-and-shoulders pattern on the longer-timeframe chart.

If the setup plays out, COIN could rise toward $230 per share in 2023, more than double its current prices.