Crypto market rebounds, lifting crypto-related stocks: what’s next?

What impact are the Bitcoin and Ethereum rallies having on crypto-related stocks and will this bullish trend continue?

After weeks of bearish trend and market consolidation, the crypto market has made a comeback in the last 24 hours.

Bitcoin (BTC) broke the $70,000 mark and traded at $71,000 as of May 21. Ethereum (ETH) surged even more dramatically, jumping over 20% to trade above $3,700.

This rise follows a major announcement by Bloomberg senior analyst Eric Balchunas, who raised the probability of Ethereum exchange-traded fund (ETF) approval from 25% to 75%.

Update: @JSeyff and I’m raising our odds of spot Ether ETF approval to 75% (up from 25%), I’m hearing rumors this afternoon that the SEC might do a 180 on this (increasingly political issue), so now everyone’s scrambling (everyone like us as he assumed) they would be rejected). See… https://t.co/gcxgYHz3om

— Eric Balchunas (@EricBalchunas) May 20, 2024

Balchunas noted that the U.S. Securities and Exchange Commission (SEC) appears to be accelerating the approval process, likely due to political pressure and its previous cautious stance toward ETFs.

The bullish sentiment is further evidenced by the optimism among hashrate futures contract traders. Analysts at Hashrate Index predict an increase in hash price in the next six months. They expect Bitcoin’s transaction fees to increase and its price to continue growing.

📢 HASHPRICE & HASHRATE MARKET UPDATE!

Hashrate Forwards have been trading in contango since the Halving, with future hashprice quotes being above the spot price.

Rising hash rate traders expect the hash price to increase in the next 6 months. Note that difficulties may decrease/stagnant, the process… pic.twitter.com/4ZLgN6Jxyp

— Hashrate Index 🟧⛏️ (@hashrateindex) May 21, 2024

This view is supported by his recent posts on X (formerly Twitter); They stated here that Bitcoin’s rise to $70,000 had a positive impact on the hash price, although it was relatively low compared to previous halving periods.

In response to the positive momentum in the crypto market, crypto-related stocks have also seen significant gains.

Coinbase (COIN) rose 9% to $225 on May 20. Similarly, MicroStrategy (MSTR) was up 9% at $1,727; This shows that the rise in the crypto market is also reflected in stocks related to the crypto sector.

In light of these developments, let’s analyze how these stocks have performed recently and what we can expect next.

What’s going on at Coinbase?

Although Coinbase experienced a decrease in revenue in 2022 compared to 2021, it became the 340th most valuable company in the world with a market value exceeding $ 55 billion as of May 2024.

Source: Market Value of Companies

Coinbase’s share price, which reached $47 per share in June 2022, rose by 378% to $225 on May 20. The stock is up more than 268% in the past year and is up over 113% in the last six months.

Source: Google

Coinbase reported revenue of $3.97 billion in 2023, down from the $7.83 billion reported in 2021. However, the company’s revenue for the first quarter of 2024 increased by 72% compared to the previous quarter, reaching $1.6 billion.

This increase in revenue and stock price is primarily due to an increase in transactions thanks to a broader rise in the crypto market and a positive change in crypto accounting rules.

The company’s net income in the first quarter of 2024 was $1.18 billion, or $4.40 per share; This was a return from a loss of $78.9 million, or 34 cents per share, the year before.

Coinbase’s revenue drivers include consumer transaction revenue for the quarter, which was $935 million, and total transaction revenue nearly tripled to $1.08 billion. Subscription and services revenue also contributed $511 million in the quarter.

The company also benefited from the increase in BTC and ETH prices in the first quarter. Bitcoin hit an all-time high above $73,000 in March, while ETH had its first major upgrade in more than a year. These events led to increased trading volumes and increased demand for Coinbase services.

Moreover, Coinbase has positioned itself as a key player in the institutional investor space, especially since the approval of its spot BTC ETF by the SEC in the US. Many of these funds have partnered with Coinbase as their custody partner, collectively increasing demand for Coinbase and its services.

Microstrategy’s Bitcoin bet

MicroStrategy, the world’s 654th most valuable company by market capitalization as of May 2024, has experienced significant fluctuations in market value over the years.

Between 2020 and 2024, the company’s market value increased by 750%, from $3.60 billion to $30.63 billion. This increase is especially impressive considering that the company’s market value fell 73.42% to $1.63 billion at the end of 2022.

Source: Market Value of Companies

The company’s share price also tells an interesting story. Between 2000 and 2020, MSTR’s share price remained relatively stable, hovering between $100 and $150 without a major uptick.

Source: Google

However, since 2020 the share price has risen steadily, rising over 1,180% over the past five years and almost 500% in the past year alone, trading at $1,727 as of May 20.

Despite these positive trends, MicroStrategy’s revenue has seen some fluctuations. The company reported revenue of $0.48 billion in 2023, compared to $0.51 billion reported in 2021. Similarly, the company’s revenue decreased from $0.51 billion in 2021 to $0.49 billion in 2022.

MicroStrategy’s price-to-earnings ratio (P/E ratio) is another metric worth considering. As of the latest financial reports, the company’s P/E ratio increased significantly from -1.09 to 200,144 at the end of 2022.

The high P/E ratio likely indicates that investors are willing to pay a premium for MicroStrategy’s earnings due to the company’s strong performance and growth potential. But high P/E stocks often carry significant risks.

One of the key factors contributing to MicroStrategy’s recent success is its significant bitcoin holdings. As of the first quarter of 2024, the company holds 214,400 Bitcoins worth approximately $15.26 billion as of May 21.

These assets, purchased at an average cost of $35,180 per Bitcoin, generated paper profits of approximately $7.76 billion for MicroStrategy.

Meanwhile, MicroStrategy’s addition to the MSCI World Index further confirms its position as a key player in the stock market.

The MSCI World Index is a broad global stock market index comprised of approximately 3,000 companies from 23 developed countries and 24 emerging markets. MicroStrategy’s inclusion in this index indicates increased BTC exposure in traditional portfolios.

What is the biggest BTC miner doing?

Marathon Digital Holdings (MARA), the world’s 2,379th most valuable company by market capitalization as of May 2024, has experienced extreme fluctuations in market value over the years.

Between 2020 and 2024, the company’s market value increased by 616%, from $0.85 billion to $6.09 billion. This increase follows a sharp decline in 2022, when the market value fell by 88.15%.

Source: Market Value of Companies

The company’s revenue trends also reveal an interesting narrative. Marathon’s 2023 revenue increased to $0.38 billion, up from $0.11 billion in 2022 and $0.15 billion in 2021.

Despite these improvements, Marathon has faced challenges, as evidenced by its current P/E ratio of -5.16667. At the end of 2022, the P/E ratio was -0.5516.

The negative P/E ratio can be attributed to a variety of factors, including operational challenges, unexpected equipment failures, transmission line maintenance, and weather-related outages at mining sites.

Meanwhile, Marathon’s stock performance over the years has been strong; The share price is up about 617% over the last five years and about 121% last year.

Source: Google

The listing of Marathon shares by S&P Global in the first week of May was an important turning point for the company. Despite this positive development, Marathon faced operational difficulties in the first quarter of 2024; It mined only 2,811 Bitcoins, down 34% from the previous quarter.

As a result, Marathon reported first-quarter earnings per share (EPS) of $1.26, well above Wall Street estimates of $0.02. However, this figure also includes a favorable mark-to-market adjustment, which complicates comparison with estimates due to newly approved FASB fair value accounting rules and the recent rise in Bitcoin prices.

Amid these challenges, the company remains optimistic about its future, maintaining its 2024 target of growing to 50 exahashes per second (EH/s) and forecasting additional growth in 2025.

What to expect next?

The future of the crypto market largely depends on its performance in the coming months.

If the market continues its upward trend, we can expect a ripple effect that will benefit crypto-related stocks. Conversely, any downturn is likely to have a negative impact on these stocks.

Momentum is positive right now; Bitcoin Trading is well above $70,000 and there is a strong rise in Ethereum, reaching $3,700.

A critical factor to monitor is the potential approval of an Ethereum ETF. If confirmed, this would be a strong bullish signal and would likely push prices higher and drive further investment in both crypto and related stocks.

Despite the optimistic outlook, you should be careful. The crypto market is notoriously volatile and sudden changes can lead to significant losses.

Diversifying investments and having a clear risk management strategy is crucial to overcoming uncertainties in this area. Never forget the golden rule of investing: never invest more than you can afford to lose.