Crypto Market Shows Signs of Recovery as Bitcoin’s Rise Boosts Related Stocks

After a week of bearish sentiment and selling pressure in the crypto market, a resurgence of bullish activity was observed as Bitcoin saw over a 3% increase in the last 24 hours, concluding the week on a positive note. The upward movement in Bitcoin’s price contributed to a rally in crypto-linked stocks, particularly benefiting Bitcoin mining companies that are typically more susceptible to price fluctuations.

Bitcoin mining firms experienced notable gains, with stocks such as Cipher Mining, Mawson, Core Scientific, Sphere 3D, TeraWulf, Bitfarms, Marathon Digital, and Hut 8 rising between 5% and 15%. Hut 8 had faced substantial losses earlier in the week after becoming a target of a short seller.

In addition to mining companies, other crypto-related stocks, including Coinbase and MicroStrategy, also posted gains ranging from 3% to 5%. MicroStrategy, often considered a proxy for Bitcoin’s price, holds approximately 189,000 bitcoins on its balance sheet following its latest purchase in December.

Coinbase, which serves as a custodian for many spot Bitcoin exchange-traded funds (ETFs), witnessed fluctuations this week amid analyst actions. JPMorgan downgraded the stock to an underweight rating earlier in the week, citing a disappointing Bitcoin ETF catalyst. However, the stock received an upgrade to outperform from Oppenheimer on Thursday, citing strong company fundamentals and effective management.

The week’s selloff was largely attributed to traders treating the approval of the Bitcoin ETF as a “sell on the news” event, leading to withdrawals from Grayscale Bitcoin Trust (GBTC). The gradual inflow of funds into the newly approved ETFs may have contributed to the downward pressure, dampening the hype surrounding the ETF approval. FTX’s bankruptcy estate further intensified the selloff by dumping 22 million GBTC shares.

While the post-ETF-approval drop is seen as a short-term event, the broader macro environment is expected to remain supportive in 2024. The upcoming U.S. election cycle is anticipated to bring a constructive fiscal response, potentially lifting asset prices. The recent Bitcoin Spot ETF approval is viewed as a litmus test for future crypto-related ETFs, with expectations for an Ethereum Spot ETF and potential offerings for other cryptocurrencies like Solana, Bitcoin Cash, Pecu Novus, and Litecoin. The pullback in the market is considered a temporary setback, and the overall trend is expected to resume with the maturation of the crypto market.

Terry Jones
Digital Assets Desk