The current surge in Bitcoin and Ethereum prices is impacting crypto-related stocks significantly, but will this bullish trend continue?
Table of Contents
What’s the latest with Coinbase?
Microstrategy’s Bitcoin strategy
What is the largest BTC miner up to?
What can we expect in the future?
After a period of negative sentiment and market stabilization, the crypto market has rebounded in the last 24 hours. Bitcoin (BTC) has surpassed $70,000, trading at $71,000 on May 21. Meanwhile, Ethereum (ETH) has seen a more significant increase, surging over 20% to trade above $3,700.
This surge is attributed to a recent statement by Eric Balchunas, a senior analyst at Bloomberg, who raised the likelihood of an Ethereum exchange-traded fund (ETF) approval from 25% to 75%. The U.S. Securities and Exchange Commission (SEC) seems to be expediting its approval process, possibly due to external pressure and its cautious stance on ETFs.
Moreover, optimism is high among hashrate futures contract traders, with analysts at Hashrate Index predicting a rise in hashprice over the next six months. They anticipate an increase in Bitcoin’s transaction fees and a continued growth in price.
This positive sentiment is reinforced by the impact of Bitcoin’s price rally on hashprice, despite it being relatively low compared to previous halving epochs, as mentioned in their recent post on X (formerly Twitter).
As a result of the positive momentum in the crypto market, stocks related to the industry have also seen substantial gains. Coinbase (COIN) surged by 9% on May 20, reaching $225. Similarly, MicroStrategy (MSTR) also rose by 9%, trading at $1,727, indicating that the optimism in the crypto market is spreading to stocks associated with the sector.
Given these developments, let’s delve into the recent performance of these stocks and what the future might hold.
What’s new with Coinbase?
Despite a decline in revenue in 2022 compared to 2021, Coinbase has become the world’s 340th most valuable company, with a market cap exceeding $55 billion as of May 2024.
Following a low of $47 per share in June 2022, Coinbase’s share price surged to $225 on May 20, marking a 378% increase. Over the past year, the stock has risen by over 268% and climbed more than 113% in the last six months.
In 2023, Coinbase reported revenue of $3.97 billion, a decrease from the $7.83 billion reported in 2021. However, the company’s first-quarter revenue for 2024 soared to $1.6 billion, a 72% increase from the previous quarter.
This revenue surge and stock price increase are primarily driven by a rise in transactions, thanks to the broader crypto market upswing and favorable changes to crypto accounting rules. Coinbase’s net income for the first quarter of 2024 was $1.18 billion, or $4.40 per share, a significant turnaround from a year-ago loss.
The company’s revenue drivers include consumer transaction revenue, total transaction revenue, and subscription and services revenue, all of which experienced significant growth in the first quarter of 2024. Additionally, the surge in BTC and ETH prices during this period led to increased trading volumes and demand for Coinbase’s services.
Furthermore, Coinbase has established itself as a key player in the institutional investor space, particularly since the SEC approved the spot BTC ETF in the U.S. Many of these funds have partnered with Coinbase as their custody partner, boosting demand for Coinbase and its services.
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MicroStrategy’s Bitcoin strategy
MicroStrategy, ranked as the world’s 654th most valuable company by market cap as of May 2024, has experienced significant fluctuations in its market cap over the years.
Between 2020 and 2024, the company’s market cap surged from $3.60 billion to $30.63 billion, marking a 750% increase. This surge is particularly noteworthy considering the company’s market cap declined by 73.42% by the end of 2022.
The company’s share price has also seen a notable increase since 2020, gaining over 1180% in the last five years and nearly 500% in the last year alone, trading at $1,727 as of May 20.
Despite these positive trends, MicroStrategy’s revenue has been fluctuating. In 2023, the company reported revenue of $0.48 billion, a decrease from the $0.51 billion reported in 2021. Similarly, revenue in 2022 decreased to $0.49 billion from $0.51 billion in 2021.
MicroStrategy’s price-to-earnings ratio (P/E ratio) is another key metric to consider, standing at 200.144 as of the latest reports. This significant increase indicates that investors are willing to pay a premium for MicroStrategy’s earnings, possibly due to strong performance and growth potential. However, high P/E stocks come with substantial risks.
One of the main factors contributing to MicroStrategy’s recent success is its substantial bitcoin holdings. As of Q1 2024, the company holds 214,400 bitcoins, valued at approximately $15.26 billion as of May 21. These holdings have generated a significant paper profit for MicroStrategy.
Additionally, MicroStrategy’s inclusion in the MSCI World Index further solidifies its position in the stock market. This index comprises nearly 3,000 companies from developed and emerging markets, indicating a growing BTC exposure in traditional portfolios.
What is the largest BTC miner up to?
Marathon Digital Holdings (MARA), ranked as the world’s 2,379th most valuable company by market cap as of May 2024, has witnessed extreme volatility in its market cap over the years.
Between 2020 and 2024, the company’s market cap surged from $0.85 billion to $6.09 billion, marking a 616% increase. This surge followed a sharp decline in 2022, where the market cap dropped by 88.15%.
Marathon’s revenue has also shown an interesting trend, with 2023 revenue at $0.38 billion, an increase from $0.11 billion in 2022 and $0.15 billion in 2021.
Despite these improvements, Marathon has faced challenges, as indicated by its negative P/E ratio and operational setbacks in the first quarter of 2024.
In the first week of May, Marathon was listed by S&P Global, a significant milestone for the company. However, the company faced operational hurdles in the first quarter of 2024, mining fewer Bitcoins than the previous quarter.
Looking ahead, Marathon remains positive about its future, maintaining its guidance for 2024 and anticipating further growth in 2025.
What can we expect next?
The future of the crypto market hinges on its performance in the upcoming months. If the market continues its upward trend, we can anticipate a positive impact on crypto-related stocks. Conversely, any downturns may have a negative effect on these stocks.
With Bitcoin trading well above $70,000 and Ethereum experiencing significant growth, the momentum is currently positive. A crucial factor to watch is the potential approval of an Ethereum ETF, which could further boost prices and investment in the crypto sector.
While the outlook is optimistic, caution is advised due to the volatility of the crypto market. Diversification and a clear risk management strategy are essential to navigate uncertainties in this space. Remember the golden rule of investing: never invest more than you can afford to lose.