Coinbase (COIN) shares are rallying as Bitcoin (BTC) climbs over $80,000 this week. Goldman Sachs also raised its price target on the stock to $196 from $173 .

The rally revives a familiar question. How closely does Coinbase’s stock actually track Bitcoin’s price?

A Moderate Correlation With Bitcoin

Coinbase does not hold Bitcoin on its balance sheet the way Strategy (MSTR) does. Its revenue comes mostly from trading fees.

That means the stock tends to rise when bitcoin’s price climbs and trading activity increases. It tends to fall when volume dries up.

That link shows up in the data, but it is not as tight as many assume. PortfoliosLab, a portfolio-analysis firm, puts the long-run correlation between COIN and Bitcoin at 0.61, a moderate reading.

Not every crypto-linked stock behaves the same way. A ranking of crypto stocks found that Bitcoin miners often track Bitcoin only loosely.

The Swings Run Bigger in Both Directions

Where Coinbase differs from Bitcoin is in the size of its moves. COIN’s volatility has run more than double Bitcoin’s over the long run, at roughly 20% against 8.5%.

That extra volatility cuts both ways. In mid-August, Coinbase shares gained roughly 9.5% one day and another 8% the next, as Bitcoin pushed through $70,000.

This week, Bitcoin extended its climb toward $80,000. COIN traded between $174.73 and $189.27 on Tuesday alone, a swing of more than 8%.

The same amplification shows up in reverse. Kaiko, a market-data provider, noted in early August that Coinbase’s stock had fallen about 36% for the year.

Bitcoin’s decline over the same stretch was roughly 27%. Kaiko’s conclusion was blunt.

Despite Coinbase’s push into new business lines, its stock still moves mostly on Bitcoin’s price.

For Coinbase, the message from this week’s rally looks familiar. When Bitcoin runs, COIN tends to run further, and that pattern could just as easily flip in reverse.

Source: BeInCrypto