The cryptocurrency market underwent a turbulent week, experiencing a sharp selloff in Bitcoin and related crypto stocks, only to witness a significant rebound. Bitcoin, which had dropped below $39,000 early in the week, made a comeback, surging back above $42,000 by Friday, and this rally also lifted stocks focused on cryptocurrencies.
Bitcoin mining companies saw substantial gains, with Core Scientific, Hut 8, and TeraWulf all recording increases of 15% or more. Other crypto-related stocks, such as Coinbase and MicroStrategy, which hold Bitcoin on their balance sheets, also rallied, showing gains of 3-5%.
The initial trigger for the selloff appeared to be profit-taking following the long-anticipated approval of a Bitcoin ETF, which some traders viewed as a “sell the news” event. Additionally, outflows from the Grayscale Bitcoin Trust and selling pressure from FTX’s bankruptcy estate contributed to the market volatility.
Despite this short-term weakness, some analysts believe that the outlook remains positive. Markus Thielen, the head of research at 10x Research, anticipates that macroeconomic factors will continue to support Bitcoin through 2024. He suggests that the U.S. election cycle may lead to constructive fiscal policies that boost asset prices.
Thielen stated, “Even if Bitcoin ETF inflows disappoint, this is not the time to turn bearish as the macro environment will remain a tailwind in 2024, and the US election cycle will see a constructive fiscal response that will lift asset prices higher.”
Feast or Famine for Coinbase After Extreme Week
Coinbase, the crypto exchange, experienced a week of extreme stock price fluctuations, driven by rapid Wall Street ratings changes.
On Tuesday, JPMorgan delivered an underweight rating to Coinbase due to disappointing inflows into Bitcoin ETFs, exacerbating an already severe selloff. This downgrade led to a nearly 10% intraday drop in Coinbase’s stock price on Tuesday.
However, market sentiment took a different turn on Thursday when Oppenheimer analysts upgraded Coinbase. They cited the exchange’s robust fundamentals and its experienced management team as reasons for the upgrade. This positive assessment boosted Coinbase shares by 7% on Thursday.
This kind of volatility is not unusual in the world of crypto stocks. Given Coinbase’s significant exposure to cryptocurrency price movements, analysts are cautioning investors to prepare for ongoing turbulence in the future.
Bitcoin Proxy Stock Mirrors Crypto’s Ups and Downs
MicroStrategy, known for holding a substantial amount of Bitcoin on its corporate balance sheet, often behaves in sync with the cryptocurrency market, effectively serving as a proxy stock for Bitcoin.
This week was no different, as MicroStrategy’s stock mirrored the rollercoaster ride of Bitcoin’s price fluctuations. The stock experienced a nearly 15% decline when Bitcoin fell below $39,000, and it subsequently rebounded by around 8% when Bitcoin surged back above $42,000.
MicroStrategy’s most recent Bitcoin acquisition took place late in 2023, between November 30 and December 26, when the company added approximately 14,620 more coins to its holdings, increasing its total Bitcoin holdings to around 189,000 BTC.
Given its substantial crypto position relative to its market capitalization, MicroStrategy is likely to continue being influenced by the frequent ups and downs in the price of Bitcoin.
As Bitcoin continues to lead the way, analysts advise investors to exercise patience and discipline rather than panic. The future for crypto stocks and tokens is expected to bring more excitement and turbulence. Nevertheless, analysts encourage investors to maintain a long-term perspective and focus on the bigger picture.
