As the stablecoin craze persisted Tuesday, Coinbase Global Inc. shares surged higher, generating what many Wall Street analysts interpret as a bullish long-term chart signal.
However, recent history demonstrates that, despite the attractive name of the “golden cross” pattern, investors should reconsider purchasing the stock because, at least for longer-term investors, the last several similar signals have not worked well as market-timing indicators.
Tuesday’s 12.1% increase in Coinbase’s stock (COIN) put it at the top of the S&P 500 index’s SPX gainers, finishing at its highest level since November 2021. In Wednesday’s premarket trading, it increased 2.5 percent.
The cryptocurrency exchange launched its Coinbase Payments product, which it referred to as a “stablecoin payments stack.” Since then, it has risen 35.8% over the last four sessions.
The stock’s 50-day moving average, which many consider to be a short-term trend tracker, increased from $230.82 to $234.34 on Tuesday as well. Additionally, its 200-day moving average, which is used to distinguish between longer-term uptrends and downtrends, increased somewhat from $233.20 to $234.11.
It is believed that a short-term bounce transitions into a longer-term uptrend at the “golden cross,” which is the upward crossover of the moving averages.
Depending on the stock, moving-average crossovers can frequently predict future movements even though they aren’t intended to be market-timing indicators.
However, recent history indicates that, at least for longer-term investments, investors shouldn’t rely on crossovers when deciding whether to purchase or sell Coinbase’s shares.
On November 26, 2024, it made its final appearance with a golden cross. After that, the stock increased by another 24%, but it only reached its top seven sessions later.
On April 3, the day after President Trump’s “liberation day” tariff announcement, Coinbase’s 50-DMA crossed below the 200-DMA, causing its final “death cross” and a widespread market selloff. Three sessions later, the stock bottomed after dropping another 11.3%.
On September 20, 2024, a death cross was also present. However, that one surfaced ten sessions after the market had already dropped to its lowest level and following a 15.4% rally.
On June 30, 2023, another golden cross appeared, signaling a 291% increase before the stock reached its peak nine months later.
Therefore, Coinbase’s stock may benefit from the crossovers, but the chances might not be favorable enough to place a wager.
