Coinbase ($COIN (+5,67 %) ) and the crypto market mainly rise in phases of expansionary monetary policy by the FED. The restrictive monetary policy (high interest rates, shrinking of the balance sheet) as we have seen from 2022 onwards is capping the market. A return to a more expansive monetary policy could trigger a further rise in the crypto market and thus also at Coinbase.
Restrictive monetary policy from the central bank's perspective:
- Allow bonds to be sold or expire and retain the proceeds
- Interest rates rise
➔ Liquidity moves towards safe investments, which now generate higher returns
Expansive monetary policy from the central bank's perspective:
- Extensive purchase of government bonds and securities
- Interest rates fall
➔ Liquidity moves towards riskier investments
History:
2019-2021: Massive expansion of monetary policy due to COVID crisis
Result: Bitcoin and the crypto market rise en masse, Coinbase goes public in 2021
exchange at the peak of liquidity in the market.
2022: Start of the interest rate turnaround & a rapidly developing restrictive monetary policy
Result: Bitcoin and the crypto market fall
Current status:
We are still in a phase of restrictive monetary policy. The FED interest rate stands at 4.5% (as of June 25). The FED balance sheet is in a phase of contraction or sideways movement.
sideways movement. A return to an expansive monetary policy is currently not in sight.
in sight.
Why I see a lot of potential in the Coinbase share:
Should the FED feel compelled by future events to return to a drastically expansive monetary policy, then risky assets such as crypto would experience increased demand.
Coinbase could thus benefit disproportionately from the crypto market
Among other things, the company benefits from
- Trading volume
- Market interest among the general public and thus access to new customers
- Trading
The effect on Coinbase would be, among other things
- Speculation & trading increases
- Increased influx of new customers
- The trading volume explodes
My conclusion:
What we have seen so far in this bull cycle is only a foretaste of what is yet to
restrictive monetary policy is only a foretaste of what could still happen at Coinbase and the individual currencies. It will take some time for interest rates to fall back to 0-2% and for the Fed to be forced to loosen its monetary policy, but those who have the patience to wait will, in my opinion, benefit from this.
IMPORTANT: NO INVESTMENT ADVICE. Please do your own analysis and do not blindly
not blindly trust the analyses of others.
