Shares of Coinbase (COIN), the prominent Nasdaq-listed cryptocurrency exchange, are teetering on the brink of overvaluation, according to a report released Friday by 10x Research, led by Markus Thielen. The firm is advocating a strategic move: short Coinbase and simultaneously go long on Bitcoin (BTC).
A Tactical Trade for Savvy Investors
Thielen’s call to action comes from a perceived mismatch between Coinbase’s surging share price and its trading volumes, which aren’t quite keeping pace. While the stock hasn’t officially crossed the 30% overvaluation line, it’s inching dangerously close. “Despite being one of the few high-quality, listed crypto plays, its current premium suggests the risk of underperformance ahead,” Thielen noted in a client briefing. He suggests that traders might capitalize on this market dislocation by shorting Coinbase stock and taking a long position in Bitcoin. Alternatively, investors could use options strategies—selling a COIN call and buying a BTC call—to manage their risk exposure more precisely.
The Underlying Disconnect
Thielen’s analysis is underpinned by a linear regression model revealing that a whopping 75% of Coinbase’s stock price fluctuations are linked to Bitcoin’s price and trading volumes. This leaves just a 25% influence from other factors, such as the potential impact of Circle’s IPO or broader U.S. crypto and macroeconomic developments. In practical terms, this model suggests that Coinbase’s price tends to climb by $20 for every $10,000 movement in Bitcoin and by $24 for every $100 billion increase in trading volume.
However, the recent market action tells a different story. Coinbase shares have skyrocketed 84% over the past two months, while Bitcoin has only nudged up by 14%. “This premium isn’t just stretched relative to Bitcoin’s current price; it’s also out of sync with the underlying crypto trading volumes, which are hovering around $108 billion,” Thielen explained. This discrepancy hints at a significant overextension, with Coinbase’s valuation appearing ripe for a potential correction. For more on the challenges facing the crypto market, see Circle Stock in Up Only Mode Even as Bitcoin, Crypto Market Struggle—Why?.
External Factors and Market Sentiment
Other contributing elements, such as Circle’s initial public offering on June 3, the introduction of the “GENIUS” stablecoin bill on June 17, and a fervor of buying from Korean investors, seem to have already been factored into Coinbase’s current valuation. Thielen points out that as this momentum recedes—evident in the recent pullbacks of Circle, KakaoPay, and Metaplanet—there’s a growing risk that Coinbase shares could be approaching a local peak. This aligns with insights from Public Keys: Circle and Coinbase Get GENIUS Bump, Bitcoin Treasuries on Shaky Ground?.
The broader crypto market is no stranger to such volatility. Investors have long juggled the ebbs and flows of digital assets, balancing the promise of innovation against the backdrop of regulatory uncertainty and shifting market dynamics. As Coinbase’s stock price races ahead of its fundamentals, the question remains: how long can this divergence persist?
Coinbase’s current valuation raises eyebrows and questions about sustainability. While the allure of crypto continues to draw investors like moths to a flame, the coming weeks could test the resilience of Coinbase’s lofty share price. As Thielen’s analysis suggests, this may be a moment for traders to recalibrate—aligning their strategies with the fundamentals rather than the fleeting whims of market exuberance.
Source
This article is based on: Short COIN/Long BTC Trade Will Be a Winner as Soaring Coinbase Nears Overvaluation: 10x Research
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
