- Crypto stocks including Marathon and MicroStrategy are up double-digits today.
- These stocks slumped around the time Bitcoin ETFs were launched, as analysts rotated their funds away from them into the ETFs.
- Investors may keep using these stocks to express bullish or bearish views on crypto, an analyst told DL News.
Crypto stocks are looking good again.
Marathon Digital Holdings, leading the charge as the largest publicly-traded Bitcoin mining firm in the US, has seen a 20% surge today alone. Other Bitcoin mining companies are also faring well, with Riot Platforms gaining 13%.
MicroStrategy, led by Bitcoin maximalist Michael Saylor and widely recognised for its substantial Bitcoin investments, has experienced a 14% uptick in its stock value. Meanwhile, crypto exchange Coinbase is up 8%.
All of these companies tumbled around the time Wall Street launched 10 Bitcoin spot exchange-traded funds. Marathon plunged 50%, while Coinbase and MicroStrategy both slumped 38%.
For years, investors had used these stocks as proxy vehicles for Bitcoin exposure without using Bitcoin futures ETFs.
But the arrival of spot Bitcoin ETFs made it possible for investors to “rotate away from these less-than-ideal instruments and into the spot Bitcoin exposure they initially desired,” analysts from Maple Finance and North Rock Digital said in January.
Now, they seem to be making a comeback — and investors are divided on whether it’s for the long-term.
“That’s been a big debate among investors since the ETFs were approved, for sure,” Chase White, senior research analyst at Compass Point Research, told DL News.
“At some level, it’s to be expected, but the companies still generate cash flows (or at least that’s the goal) and those cash flows are still valuable,” he said. However, the stocks are unlikely to keep trading at a premium relative to their net asset values, White said, since investors now have better vehicles to get exposure to Bitcoin.
Rallying after Bitcoin
The broader stock market has soared this year, helping mining stocks and other risk-on assets including equities and crypto. The S&P 500 is up about 5% this year to a record high, while the tech-heavy Nasdaq is up almost 7%.
Bitcoin, meanwhile, clawed back ETF-led losses from earlier in January and is up about 3.5% year-to-date.
“Bitcoin mining stocks are rallying in response to Bitcoin’s continued positive price momentum,” Brian Dobson, managing director of disruptive technology equity research at Chardan, told DL News.
That sentiment was also echoed by White, who said that miners were “playing catch up to Bitcoin’s price, which has now moved above the psychologically important $45,000 level.”
Coinbase and MicroStrategy are also riding that wave.
“The market narrative after approvals was that ETFs would harm Coinbase trading business because Coinbase charges high commissions compared to the ETFs’ fees,” White said.
“However, in general, investors tend to use Coinbase stock to express a bullish or bearish view on crypto, so with Bitcoin prices up, pulling other token prices up with it, investors are piling into the stock, similar to the Bitcoin miner stocks,” White added.
MicroStrategy might continue to be perceived as a leveraged bet on Bitcoin due to its significant holdings, according to White, since the company’s main value proposition resides in its Bitcoin stash currently worth roughly $8.5 billion.
Tom Carreras is a markets correspondent at DL News. Got a tip about crypto stocks? Reach out at firstname.lastname@example.org