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Companies with bitcoin exposure jumped on Wednesday in lockstep with the broader cryptocurrency rally ahead of the highly anticipated direct listing of Coinbase.
"The Coinbase IPO is being met with excitement that global crypto market cap will grow by at least 50% later this year," Edward Moya, senior analyst at OANDA, told Insider. "Each legitimate investment vehicle for cryptocurrencies is solidifying the belief that this bubble won't come crashing down to zero."
"All four of these have a direct benefit from bitcoin being up," John Wu, president of Ava Labs, the company beside altcoin Avalanche, told Insider. "Others like PayPal who help facilitate the trading of crypto are up because of sentiment but they don't actually own bitcoin."
Wu said the stocks are now trading lower since investors are "buying the hype, selling the fact". He added that investors may now be allocating ay from these names to the cryptocurrencies themselves.
Coinbase CEO Brian Armstrong on Wednesday during his interview with CNBC made the case as to why the public should invest in his firm rather than straight to the cryptocurrencies.
"We are kind of what you might call an index bet or a levered bet on the crypto space more broadly," he said.
Tesla on February 8 disclosed its $1.5 billion bitcoin investment, according to a regulatory filing. Elon Musk's company followed up with an announcement the next month that people can now buy a Tesla car with bitcoin.
MicroStrategy, meanwhile, holds the record as the first publicly listed company to buy bitcoin as part of its capital allocation strategy in August 2020. It's since bought billions worth of the coin on multiple occasions and currently holds $5.4 billion, according to a regulatory filing. In April, Michael Saylor's firm announced that it is paying non-employee board members entirely in bitcoin instead of cash.
As for Square, its founder and CEO Jack Dorsey has long been one of the staunchest advocates of bitcoin. In October 2020, Square announced it had purchased 4,709 bitcoins for an aggregate price of $50 million. The San Francisco-based company paid an average price of $10,617 for each bitcoin.
The Coinbase direct listing on the Nasdaq prompted a broader cryptocurrency rally.
Bitcoin broke its record for the third straight day, soaring to an all-time high above $65,000 Wednesday. Ether spiked as much as 8% to a new record high, hitting a $250 billion market capitalization for the first time on Tuesday. Dogecoin hit new records as well, jumping 34% to a valuation of $11 billion.
"Bitcoin and the other top altcoins are making fresh record highs as large parts of Wall Street are finally drinking the Kool-Aid," Moya said.
The Coinbase direct listing is viewed by many cryptocurrency advocates as a milestone for the digital ecosystem as it looks to continue to make headway into mainstream financial markets.
"Coinbase is the first crypto company to make mainstream waves and is already valued higher than historic financial institutions like JP Morgan. This, coinciding with crypto's market cap surpassing 2 trillion, provides the space with much-needed stability that will reassure retail investors," Ganesh Swami, co-founder and CEO of Covalent, a provider of blockchain data, told Insider.
The stocks were all up during premarket trading but had pared some gains late Wednesday morning. Here's where the stocks traded as of 10:51 a.m. ET:
- Tesla down 0.37 to $759.00
- MicroStrategy up 5.52% to $801.72
- Square up $2.47% to $266.52
- Galaxy Digital Holdings up 6.90 to $31.74
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See Also:
- Coinbase's eye-popping $100 billion valuation is reasonable for a disruptive, cutting-edge crypto firm, Manhattan Venture Partners says
- Bitcoin is a headache to store, and that's created an investment opportunity that could theoretically pay determined traders big risk-free returns by December
- A 29-year-old self-made billionaire breaks down how he achieved daily returns of 10% on million-dollar crypto trades, and shares how to find the best opportunities
