A rough weekend tested cryptocurrencies and the newly public stock Coinbase COIN +8.90% . As of Monday, both the cryptocurrency exchange’s stock and the meme-fueled Dogecoin were showing resilience, while Bitcoin remained relatively depressed.
Investors had been waiting for Coinbase stock to be tested after its big debut last week, and they didn’t have to wait long. Bitcoin, the cryptocurrency that accounts for the largest share of volume on the exchange, plunged over the weekend. In what should be a small vote of confidence in Coinbase, the stock fell much less than its most important asset.
Coinbase (COIN) was down 1.1% on Monday from its Friday closing price, even as Bitcoin, which is always traded, had fallen 9.2% over the same period. Bitcoin fell below $54,000 on Sunday, after trading above $64,000 as recently as Wednesday.
Mike Novogratz, CEO of crypto firm Galaxy Digital, wrote on Twitter that the drop showed that the “market got too one way,” adding “We will be fine in the medium term as institutions coming to the space. In the shorter term we will need to rebuild a trading base. Market damage doesn’t heal overnight.”
Various news reports and rumors over the past few days could have caused Bitcoin to fall. On the list are an impending ban on cryptocurrency purchases in Turkey and power-outage issues in the Xinjiang province of China, where the bulk of Bitcoin mining takes place using computer chips that need substantial power. Rumors spread, too, that the Treasury Department could crack down more aggressively on the use of cryptocurrencies for money laundering.
It is hard to pin down why Bitcoin moves on any given day. Often, it can be traced to technical reasons. When the market’s momentum changes, prices can fall rapidly as investors start to fear that they will lose out on a windfall if they don’t sell immediately. There is substantial price support for Bitcoin at $50,000, and growing support above $57,000, according to Chainalysis, which tracks buys and sells on the blockchain.
“There are now 2.3 million bitcoin that have changed hands on-chain at a price of more than $50k,” wrote Philip Gradwell, chief economist at Chainalysis, in a report last week. “That level of demand to buy and hold at such high prices puts a floor on the price. And support at even higher prices is getting stronger, with 608k bitcoin acquired at a price of more than $57k. It also demonstrates the level of investment in cryptocurrency: those 2.3 million $50k+ bitcoin cost $125 billion. Such levels of investment require large companies that can face the scrutiny of the public market.”
That support appeared to be kicking in on Monday. After a two-day hangover, Bitcoin was on the rebound, rising 2.2% over the previous 24 hours.
At the same time, Dogecoin, a cryptocurrency with a boisterous user base, was once again nearing all-time highs. Dogecoin has substantial detractors who consider it a distraction from other crypto use cases, and it isn’t available for purchase on Coinbase. Still, it has rallied as celebrities like Tesla CEO Elon Musk have embraced it. Robinhood, which does support Dogecoin purchases, experienced outages on Friday due in part to the frenzy for the currency.