[ad_1]
(Bloomberg) — Stocks tied to cryptocurrencies fell on Thursday, reversing an early rally driven by U.S. financial regulators’ approval for exchange-traded funds (ETFs) that invest directly in Bitcoin.
Most Read Articles on Bloomberg
A landmark decision by the U.S. Securities and Exchange Commission on Wednesday is a game-changer for the roughly $1.7 trillion digital asset sector, expanding access to the largest cryptocurrency on Wall Street and beyond. . The SEC decision authorized funding from smaller competitors including BlackRock, Invesco, and Valkyrie.
Stocks that fell on Thursday included shares of Coinbase Global, Robinhood Markets, mining company CleansePark and Marathon Digital Holdings, as the broader market fell on stronger-than-expected inflation reports. The previous increase was canceled out. Coinbase, the leading cryptocurrency stock, fell 6.7% to close at about $141 per share, eating into gains of more than 250% over the past 12 months.
Read more: Why it took Bitcoin ETFs so long to appear: QuickTake
Now that the SEC approval has passed, industry watchers may be pondering how much upside crypto stocks have after a big rally in 2023.
Coinbase’s potential upside may be “more modest than expected, with only a 1% to 2% benefit from custody fees and a 5% to 10% total gain if the ETF facilitates additional spot Bitcoin trades.” , Mizuho Securities USA LLC analyst Dan Dolev wrote in a note. . He rates the stock underperform and has a price target of $54.
Read more: Why it took Bitcoin ETFs so long to appear: QuickTake
Citigroup’s Christopher Allen expressed similar sentiments in a note launching a 90-day downside factor watch on Robinhood stock ahead of the SEC’s approval.
“While stock prices are rising due to improvements in crypto trading, in our view the revenue contribution (5% of turnover) is not significant enough to justify such a reaction,” he said, giving a neutral rating. The company maintained its rating and price target of $12.50.
Bitcoin pared its gains after topping $49,000 early Thursday. The largest cryptocurrency by market capitalization had soared more than 160% over the past year in anticipation of regulatory approval and the prospect of monetary policy easing.
Of course, some analysts see upside in certain companies. Analysts at Wedbush Securities raised their price target on Coinbase from $110 to $180 following SEC approval. The company is sure to benefit given its “dominant role in these ETFs,” analysts led by Moshe Khatri wrote in a note dated Thursday.
Cryptocurrency stocks had risen before the SEC’s decision, but the regulator’s false postings to the X account in advance of the decision caused a temporary decline.
Still, Deutsche Bank analysts Marion Labour and Cassidy Ainsworth Grace wrote in a note Thursday that the approval “represents an important milestone.” According to the note, the two analysts expect Bitcoin to rise throughout the year, but cautioned investors “not to confuse rising prices with broader predictions that cryptocurrencies will overtake traditional finance.”
“For now, the approval of the Spot Bitcoin ETF opens a new chapter for Bitcoin prices, but the volatile situation is likely to continue,” they said.
–With assistance from Alexandra Muller.
(Updates stock price movements when the market closes.)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
[ad_2]
Source link
