Trader: Crypto Bubble Party Is Coming To An End And Coinbase May Be Easiest Short. Photo by Alesia Kozik from Pexels, https://www.pexels.com/photo/sign-pattern-vintage-business-6777569/?utm_content=attributionCopyText&utm_medium=referral&utm_source=pexels, https://www.pexels.com/@alesiakozik?utm_content=attributionCopyText&utm_medium=referral&utm_source=pexels
The crypto bubble party is going to come to an end, one way or the other, and when that happens, cryptocurrency exchange platform Coinbase may be the easiest short because it has already shown weakness in its rally, according to Boris Schlossberg, a leading foreign exchange expert.
The crypto market has experienced a rough slideback affecting a number of cryptocurrencies including Bitcoin and Ethereum.
“If crypto begins to crack as the summer proceeds, just based on a corrective basis, Coinbase is going to be, from a stocks point of view, one of the easier shorts there is,” Schlossberg, CEO of FX strategy at BK Asset Management, told CNBC on May 5.
“For me the weakness in Coinbase suggests that there will be further weakness if crypto begin to crumble,” Schlossberg added.
Coinbase, like many other exchanges, allows investors to short cryptos via margin trading, which allows one to “borrow” money from a broker in order to make a trade.
The exchange is one of the largest and easiest to trade in cryptocurrencies. Its huge trade volumes, however, make it susceptible to volatile price changes of the digital assets traded on it. It has more than 40 crypto assets available to investors on its platform.
When shorting, investors sell their tokens hoping that the price will drop in the future and allow them to buy cheaper, repay their broker and take the difference as profit. However, if the price rises instead of falling, the investor is caught in a short squeeze and is forced to incur losses.
Major digital assets including Bitcoin, Ether, Litecoin, and Dogecoin initially rallied this year on the back of a speculative frenzy that has continued to drive demand.
Dogecoin was expected to rally to its $1 target after the buzz created by Tesla CEO Elon Musk hosting Saturday Night Live on May 8. The crypto’s value reached $90 billion, rallying 13,575 percent year-to-date to trade at $0.653 on May 5. It has since fallen back and was trading at $0.478386 as of this writing.
But even if Dogecoin reaches many traders’ $1 target, investing in a space with limited fundamental catalysts carries significant risk, Schlossberg said. He added that while Bitcoin will never be a currency, it has some long-term value as an alternative to gold due to its affordability.
Gina Sanchez, founder and CEO of Chantico Global, noted during the same CNBC interview that the crypto space is very volatile and therefore it is difficult to see these digital assets as a real form of money.
She said she believes crypto has been the marginal benefactor of over-inducement and a closed economy.
