Crypto Stock Mania Tested by Sliding Prices, Bitcoin Slump
April 19, 2021
A drop in cryptocurrency-linked stocks in the wake of Bitcoin’s slide and Coinbase Global Inc.’s choppy debut is stirring a rallying cry from optimists who reject fears that the sector has peaked.
A global, Bloomberg-curated basket of equities linked to crypto trading or Bitcoin mining fell some 9% over the past week, paring 2021’s climb to about 130%. A weekend Bitcoin plunge rattled crypto mania, but the token has since pared some losses and remains up 690% over the past year.
“The public market validation of Bitcoin and the entire space from Coinbase’s listing will encourage people who can invest in the markets to do so,” said Jehan Chu, managing partner at crypto adviser Kenetic Capital in Hong Kong. There are signs retail investors took advantage of Bitcoin’s fall, he added.
Bitcoin climbed as much as 2.3% on Monday, and was trading at $56,691 as of 6:08 a.m. in New York.
Day traders have also pushed up stocks such as Bitcoin miner Marathon Digital Holdings Inc. and crypto broker Voyager Digital Ltd., which are up at least 8,900% in the past year. For some, the $68 billion market value for digital-token exchange Coinbase justifies bets on a watershed advance in crypto adoption. Others fear the listing and Bitcoin’s gyrations are part of an unsustainable, stimulus-fueled frenzy.
“Passions run deep” on the short-term crypto outlook “but dips are clearly supported,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note Monday.
Coinbase, the biggest U.S. cryptocurrency exchange, was down 2.6% in U.S. pre-market trading after closing at $342 on Friday, off a peak of $429.54 hit in the first few minutes of its April 14 debut. Marathon and Voyager lost about 20% last week.
On Monday in Asia, shares in firms such as Japan’s Monex Group Inc., which owns a crypto exchange, and Woori Technology Investment Co. -- which has a stake in a leading South Korean digital-token broker -- were in the red. Cryptocurrency-linked stocks also fell in the U.S. premarket, with Riot Blockchain Inc. down 8.4% and Marathon slipping 7.2%
Still, analysts who have begun covering Coinbase are bullish, on average penciling in a 52% climb over the next year. The firm’s Chief Executive Officer Brian Armstrong described the listing as a shift in legitimacy for the entire cryptocurrency industry.
The fact that more sell-side analysts will be forced to engage with the digital-token sector is a positive development for it, according to PwC’s Hong Kong-based Global Crypto Leader Henri Arslanian.
“It forces now the sell-side firms to cover Coinbase and crypto in a more practical and detailed way,” Arslanian said. “That’s going to bring not only more experience but also more expertise in the asset class.”
Many pitfalls remain: Bitcoin’s boom could yet turn to bust, and regulators are poised to tighten oversight of digital tokens and related businesses as they achieve more mainstream acceptance.
But for now the cryptocurrency craze continues. For instance, Dogecoin -- a token created as a joke -- nearly tripled to a market value of about $50 billion on Friday. Demand was so brisk that investors trying to trade it on Robinhood crashed the site.
“It’s still early in the game,” said Dave Chapman, executive director with Hong Kong-based BC Technology Group Ltd., which operates the digital-asset platform OSL. “Opportunity remains for investors to participate and secure a first-mover advantage.”