Following a week of selling pressure, a resurgence of bullish sentiment is evident in the crypto market, propelling crypto-linked stocks on a rally as Bitcoin (BTC) registers a more than 3% increase in the last 24 hours, concluding the week in positive territory. Notably, Bitcoin mining companies, known for their susceptibility to price fluctuations, witnessed substantial gains, with stocks such as Cipher Mining (CIFR), Mawson (MIGI), Core Scientific (CORZ), Sphere 3D (ANY), TeraWulf (WULF), Bitfarms (BITF), Marathon Digital (MARA), and Hut 8 (HUT) rising between 5% and 15%. This uptick follows a challenging week for Hut 8, which faced pressure after becoming a target of a short seller.
Other crypto-related stocks, including crypto exchange Coinbase (COIN) and enterprise software firm MicroStrategy (MSTR), which holds Bitcoin in its balance sheet, also experienced gains ranging from 3% to 5% on Friday. MicroStrategy, often viewed as a proxy for the Bitcoin price, holds approximately 189,000 BTC in its balance sheet, following its latest acquisition in December.
Coinbase, serving as the custodian for many spot Bitcoin exchange-traded funds (ETFs), underwent a roller coaster ride on Wall Street throughout the week due to upgrades and downgrades. JPMorgan initially downgraded the stock to an underweight rating, citing a disappointing Bitcoin ETF catalyst, but it was subsequently upgraded to outperform by Oppenheimer on Thursday, highlighting strong company fundamentals and a resilient management team.
The recent sell-off in the market was triggered by traders treating the Bitcoin ETF approval as a “sell the news” event, leading to a withdrawal of funds from Grayscale Bitcoin Trust (GBTC). The slow inflow of funds into the newly approved ETFs may have further intensified the pressure by tempering the hype built up before the ETF approval. Additionally, FTX’s bankruptcy estate dumping 22 million GBTC shares added to the downward pressure.
Markus Thielen, Head of Research at 10x Research, suggests that the post-ETF approval drop might be a short-term phenomenon. He notes, “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.” Thielen emphasizes that the correction in early January was the opportune time to turn bearish, and any further dips could present buying opportunities.
