Options Corner: Coinbase's Crossroads — Bearish Signal Or Bullish Opportunity?

Benzinga2025-03-29

From a snapshot perspective of market sentiment, cryptocurrency exchange and services provider Coinbase Global Inc COIN does not appear to be walking on auspicious grounds. Instead, circumstances ...

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Still, a rotation in opinion may be materializing among smart money traders or the so-called whales. As such, bullish speculators may have a fast-approaching opportunity in Coinbase stock.\nAgain, at first glance, the notion of imminent upside appears far-fetched, to say the least. One of the more damning indicators is the death cross. A phenomenon that describes when a shorter-running moving average slips beneath a longer-running average — typically the 50-day moving average falling below the 200 DMA — the death cross symbolizes a deceleration of momentum. In some cases, it could also signal the beginning of a prolonged downturn or an outright bear market.\nTo be clear, Coinbase stock has yet to officially print a death cross — but, it's very much on the cusp of doing so. At time of writing on Friday, Coinbase’s 50 DMA lands at $239.54, while the 200 DMA sits at $232.26 — a gap of only 3.13%. Today's big drop, contributing to a five-day loss of roughly 12%, has accelerated the likelihood of the dreaded signal flashing.\nWhat's more, technical analysts have warned certain cryptos themselves are at risk of printing the death cross. Since Coinbase stock in many ways represents a proxy of the broader crypto complex, an erosion of confidence in the underlying benchmark would seem to bode poorly for Coinbase stakeholders.\nWhy Coinbase Stock Could be Offering a Contrarian Setup\nDespite the ominous-sounding nature of the death cross, in certain situations, the technical pattern could represent a bullish contrarian signal. In other words, rather than representing a warning of imminent doom, the bearish crossing of the moving averages could instead be a discount.\nFollowing its direct listing in April 2021, Coinbase stock has printed three death crosses, as follows:\n\nOn Jan. 27, 2022, Coinbase's 50 DMA fell below its 200 DMA, with a closing price of $170.20.\nOn June 22, 2023, Coinbase flashed the signal, closing at $57.49.\nOn Sept. 9, 2024, Coinbase last signaled the death cross at a closing price of $170.09.\n\nAlthough it's an extremely small sample size, it's intriguing that in every case, Coinbase stock has jumped higher one month after the death cross flashed. Starting from the first death cross, the post-one-month price of Coinbase clocked in at $190.77, $98.85 and $213.72, for an average return of 36.56%.\nImage by author\nAdding to the speculative fire is the pivoting of sentiment among the whales. On March 18, Benzinga's options scanner identified unusual options activity that was net bearish. Specifically, the biggest transaction in terms of dollar volume were for the sale of $300 calls expiring June 20 of this year. There were other sold calls expiring on the aforementioned date with a strike price of $150.\nBased on the premiums received, readers can infer that participating institutional traders do not anticipate Coinbase stock breaking above the $190 level. While this sounds pessimistic, more recent options scans show a gradual sentiment shift.\nDuring the midweek session, the biggest non-neutral transaction was for the purchase of $5 calls with an expiration date of Dec. 19, 2025. These ultra-deep in-the-money (ITM) calls carried a premium (ask price) of $200.25. By adding this premium to the strike price, one can presume that participating traders anticipate Coinbase stock breaking above $205.25 before Dec. 19 — preferably significantly above $205.25 and well before Dec. 19.\nFinally, it's worth pointing out that around the $175 level, Coinbase stock is trading on a long-term support line. Therefore, it wouldn't be out of the question for Coinbase shares to pop higher, if only as a dead-cat bounce.\nWaiting for the Right Moment\nAs stated earlier, the death cross has yet to materialize, although that day could come at any moment, depending on the volatility of Coinbase stock. It's also worth pointing out that history isn't guaranteed to repeat. While Coinbase currently offers a \"perfect\" death cross record, there are no promises that the fourth edition will pan out favorably.\nNevertheless, assuming that Coinbase stock prints the death cross next week, a rebound could materialize by the options chain expiring May 2. Conservatively, the average return of the lower-performing death crosses comes in at nearly 19%, implying a price target of around $208. To be blunt, speculators have enticing avenues to consider.\nFor example, aggressive traders may consider the 200/205 bull spread. This transaction involves buying the $200 call (at a time-of-writing ask of $750) and simultaneously selling the $205 call (at a $550 bid). The proceeds from the short call partially offset the debit paid for the long call, resulting in a net cash outlay of $200. Should Coinbase hit the short strike price at expiration, the reward is $300, or a 150% payout.\nFor the same May 2 expiration date, ultra-aggressive traders could bump up the call spread's short strike to $210; that is, buy the 200/210 spread. This transaction involves a net cash outlay of $310, while the maximum reward rises to $690, or a blistering payout of almost 223%.\nRead Next:      • Options Corner: Why Hewlett Packard Enterprise’s Death Cross Could Be A Contrarian Indicator\nPhoto: rafapress on ShutterstockCOINCoinbase Global Inc$174.94-7.23%Stock Score Locked: Want to See it?Benzinga Rankings give you vital metrics on any stock – anytime.Reveal Full ScoreEdge RankingsMomentum42.61Growth97.65Quality-Value49.11Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs© 2025 Benzinga.com. Benzinga does not provide investment advice. 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