Welcome back to Distributed Ledger. This is Frances Yue, crypto and markets reporter at MarketWatch.
Bitcoin has had a notable rally so far this year, with a gain of over 160% year to date, although it is still down about 36% from its all-time high in November 2021.
Many crypto-related stocks rose even more, with some posting year-to-date gains twice as large as that of bitcoin.
Crypto exchange Coinbase’s shares
COIN,
have rallied 289% so far this year, according to FactSet data. MicroStrategy’s stock
MSTR,
has risen 305% for the period.
Shares of crypto miner Riot Platforms
RIOT,
have risen 340% so far in 2023, while shares of Marathon Digital Holdings
MARA,
have gone up 362% and shares of Ebang International Holdings
EBON,
have advanced more than 180%.
I caught up with Matt Hougan, chief investment officer at Bitwise Asset Management, to talk about the reasons behind crypto stocks’ outperformance over bitcoin.
Crypto stocks’ rally
Many crypto companies, especially crypto miners, have inherent leverage in their businesses, Hougan said. “It’s the natural state of crypto miners to deliver a leveraged return on the price of bitcoin, because of the margin expansion and financing activity,” he said.
Meanwhile, many owners of crypto stocks are professional investors who are not comfortable holding digital assets directly, Hougan noted. They are not strong believers in digital assets who will hold bitcoin whether it is up or down, he said.
“I think it’s reasonable to say that at the end of 2022, amid the collapse of FTX and a plunging bitcoin price, those users likely fled the market,” Hougan said.
Bitcoin fell to close to $15,000 in November last year, after the collapse of crypto exchange FTX.
The investors’ sale of crypto stocks led to those equities being undervalued relative to their fundamentals, Hougan noted.
“Part of the outperformance of crypto stocks this year is just catching up to that reality as those investors re-enter the market” as bitcoin rallies, he said.
El Salvador’s bitcoin holdings
Nayib Bukele, the president of El Salvador, said Monday on X, formerly known as Twitter, that the country’s bitcoin holdings are posting a profit.
The country’s bitcoin portfolio is up about 2.8%, or $3.6 million, since 2021, according to a screenshot Bukele shared.
With several purchases over time, the country now holds over $130 million worth of bitcoin, he noted.
Still, Bukele said he won’t capture the profit, as the country has no plan to sell its bitcoin holdings.
“Of course, we have no intention of selling; that has never been our objective. We are fully aware that the price will continue to fluctuate in the future, this doesn’t affect our long-term strategy,” Bukele wrote.
MarketWatch’s Weston Blasi wrote more about it here.
What’s next for bitcoin?
Traders are eyeing $48,000 as bitcoin’s next resistance level, a local peak set at the end of March 2022, according to Julius de Kempenaer, senior technical analyst at StockCharts.com.
In the case of a setback, bitcoin faces a resistance level at about $38,000.
Crypto in a snap
Bitcoin rose 15.3% in the past seven days and traded at around $44,000 on Wednesday, according to CoinDesk data. Ether
ETHUSD,
rose 11% during the same period, to around $2,271.
Must-reads:
- As bitcoin’s price surges, crypto’s power in Washington withers (MarketWatch)
- Jamie Dimon lashes out against crypto: ‘If I was the government, I’d close it down’ (CNBC)
Read the full article here
