Bitcoin rally drove MicroStrategy and Coinbase during Q1, but risks lie ahead

Bitcoin rally drove MicroStrategy and Coinbase during Q1, but risks lie ahead
Michael Saylor's MicroStrategy and crypto exchange Coinbase have notched big gains this year. Credit: Andrés Tapia
  • Crypto stocks including MicroStrategy and Coinbase have mirrored the industry’s 2024 rally.
  • As Bitcoin hovers near all-time highs, some are betting crypto stocks are overextended.
  • The US SEC notched a legal win against Coinbase.

MicroStrategy and Coinbase saw huge gains in the first quarter of 2024.

MicroStrategy, the world’s biggest Bitcoin holder led by enthusiast Michael Saylor, has seen a 146% jump in its stock value since January.

Crypto exchange Coinbase, meanwhile, has gained 52% this year as it fought a legal battle with the US Securities and Exchange Commission.

Driving the rally for crypto stocks? Bitcoin.

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Bitcoin is up 66% since January, thanks largely to a batch of spot Bitcoin exchange-traded funds approved in the US. In two months they netted $12 billion in inflows to become some of the fastest-growing ETFs ever.

Many crypto stock prices declined around the time the ETFs arrived, as investors flocked to the new products, but the drop was short-lived. The two crypto stocks recouped their losses and rallied as Bitcoin rocketed to all-time highs.

Headwinds

Software company MicroStrategy fell 15% on Thursday after short seller Kerrisdale Capital reported it was betting against the stock. MicroStrategy is trading at “an unjustifiable premium” to Bitcoin, the firm wrote.

Kerrisdale highlighted the new spot Bitcoin ETFs as a reason MicroStrategy no longer holds an edge in the Bitcoin market.

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“The days when MicroStrategy shares represented a rare, unique way to gain access to Bitcoin are long over,” Kerrisdale wrote.

Despite this week’s drop, the firm’s stock is still up 96% this month. To date, MicroStrategy has accumulated 214,246 Bitcoin worth about $15 billion.

Coinbase also suffered this week when a federal judge denied its request on Tuesday to throw out an SEC lawsuit. The lawsuit alleges Coinbase made an unregistered offer and sale of securities, which Judge Katherine Polk Failla ruled to be accurate.

The case will now head to trial.

Coinbase stock dropped about 8% on the news.

Tyler Pearson is a junior markets correspondent at DL News. Got a tip? Email him at ty@dlnews.com.