When you buy a hot stock in a hot sector, typically your expectation is that the price will continue to go up. That’s why it’s surprising to find so much weakness in companies closely associated with the cryptocurrency market. It’s odd to see confirmed, unmistakable down trends so quickly in this heavily-traded group.
2 of these peaked weeks ago and have declined steadily since then. One peaked within the first few minutes of its initial pubic offering and began a descent on the same day. Without getting into the reasons being offered for this bout of serious selling, here are the price charts for each. See for yourself.
Coinbase.
Those lucky enough to receive a pre-IPO allocation of stock got in at $250/share. Judging by the first day volume bar, it’s clear that many of them sold quickly at a nice profit. Those excited by the Coinbase story and who bought post-IPO day are now underwater.
The price on IPO day hit 420. By the first week of May, Coinbase traded briefly back at 250, the original offering price. It’s bounced a bit since then, but you don’t have to examine the chart too closely or for too long to ascertain that the trend is down. At least, so far.
Without sounding too cynical, I’ve seen this type IPO pattern play out over and over during the years I’ve been around the stock markets. Favored clients get in on the best part — meantime, the intense hype sucks in anyone else who couldn’t stay away. Those involved in structuring and offering such deals do well.
Riot Blockchain.
That’s a peak price up near 80 back in late February. Since then, it’s dropped back to the late January, early February levels in the 20 to 25 range. Below the Ichimoku cloud, the trend for Riot Blockchain is down. Note that less than six months ago 10 was the average price for a share. Are investors comfortable enough with “the story” for this company that they’re willing to endure moves from 10 to 80 and then back again to 20?
Marathon Digital.
You could pick up a share for $5 in early December. The stock shot up to $57 by early April. Since then, it’s plunged all the way back down to $20. Marathon Digital has taken out the March low (a support level). The down trend may now find the next level of support, from January, at 15.
Naturally, prices could suddenly resume previous up trends based on a number of factors: interest rates, the Middle East, tweets by Elon Musk. Who knows? Right now, though, the direction for these stocks is down.
Studying price charts like these help investors to cut down on the noise expressed about such stocks in the financial media. You can see clearly whether the trend is up or down. It’s easy to identify previous areas of support and resistance — that is, where buyers showed up and where sellers dumped.
