Coinbase (COIN) and Circle (CRCL) Plummet Together Ahead of PCE Announcement... Why?

▲ Circle (CRCL), Dollar (USD)/ChatGPT generated image

Ahead of the announcement of the US August Personal Consumption Expenditures (PCE) price index, the stocks of Coinbase (Coinbase, COIN) and Circle (Circle, CRCL), leading beneficiaries related to virtual assets, both showed weakness. Whether inflation will slow down and the interest rate remarks from Federal Reserve (Fed) officials have emerged as the biggest watershed for stock movements this week.

According to CoinGape, a virtual asset media outlet, on September 28 (local time), Coinbase and Circle stocks both recorded declines in pre-market trading ahead of the announcement of the US Personal Consumption Expenditures price index on September 30. The market expects the August headline PCE inflation rate to slow from 3.7% in July to 3.6%. The consensus forecast is that the core PCE inflation rate, excluding volatile food and energy, will rise by 0.3% month-over-month and slightly decrease from 3.3% to 3.2% year-over-year.

Prospects of slowing macroeconomic indicators and a series of remarks from Fed officials are simultaneously creating both positive expectations and caution for virtual asset-related stocks. Tom Lee, chairman of Bitmine, diagnosed that the PCE inflation rate could fall to 3% due to changes in the indicator calculation method, which precisely reflects recent spending patterns. On the other hand, CoinGape's prediction market reflects a 65% probability that the Fed will raise the benchmark interest rate by 0.25 percentage points in October, so attention is focused on the remarks from key officials scheduled for this week, including New York Fed President John Williams and Chicago Fed President Austan Goolsbee.

Coinbase is fully committed to defending its critical technical support level. Coinbase stock closed last week at $195 and then fell 1.7% in pre-market trading. Concerns are rising that if it falls below the $190 support level on the weekly chart, it could slide to the $163 to $170 support level. However, the Relative Strength Index (RSI) is forming a gradual upward curve and bullish divergence, suggesting that if the support level is maintained, there is a possibility of attempting to break through the $199 resistance level, which is the 50-week Exponential Moving Average (EMA).

Circle's stock plummeted to a 10-day low due to macroeconomic variables and the aftermath of management changes. News of internal leadership reshuffles, including the resignation of the Chief Financial Officer (CFO), led to a 4.3% sharp drop on September 25, followed by an additional 3% decline in pre-market trading. Selling pressure has increased, with the Chaikin Money Flow (CMF) turning negative and the upward momentum of the Moving Average Convergence Divergence (MACD) slowing down. Market experts analyze that if selling pressure intensifies during regular trading hours, it could retreat to the $80 support level, and a full trend reversal can only be confirmed by surpassing the $98 resistance level.

The actual confirmation of slowing US inflation data and the Fed's monetary policy path are expected to steer the direction of virtual asset infrastructure companies' stock prices. Market attention is focused on whether Coinbase can solidify its $190 support base and whether Circle can rebound from the impact of management changes.

[Article Key Summary]

-Ahead of the August PCE announcement, Coinbase (COIN) and Circle (CRCL) stocks both fell in pre-market trading.

-The prospect of PCE slowing down and a 65% probability of an October interest rate hike have heightened caution regarding remarks from Fed officials.

-Coinbase has begun defending its $190 support level, while Circle has fallen to a 10-day low due to the negative impact of management changes.

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