Coinbase, Marathon Digital lead 2023 resurgence in crypto stocks
CRYPTOCURRENCY-linked stocks are roaring back as Bitcoin enjoys its longest winning streak in more than nine years.
The rally in Bitcoin has boosted shares of crypto-exposed companies such as Coinbase Global, Marathon Digital Holdings and Riot Platforms. All three are up 45 per cent or more from the start of the year. Meanwhile, the NYSE FactSet Global Blockchain Technologies Index has surged more than 49 per cent. The index is set for its best month since February 2021.
For investors, the rapid rebound is a much-needed reprieve from a brutal stretch of losses that began in late 2021. Crypto stocks were among the worst-performing shares last year, as Bitcoin tumbled more than 64 per cent amid a tumultuous stretch for the industry that included the collapse of Sam Bankman-Fried’s FTX exchange. Coinbase, Silvergate Capital and Marathon Digital were among a group of crypto stocks that plunged by 80 per cent or more in 2022.
Crypto-mining stocks have been some of the biggest beneficiaries of the Bitcoin rebound. The Luxor Hashprice Index, which tracks how much miners can earn from the computing power used for the Bitcoin network, is up about 20 per cent this year. Shares of Bitfarms, Hut 8 Mining and Bit Digital have all seen their share prices more than double since the start of January.
Some of the strength may be powered by short sellers who are exiting positions after cashing in on outsized profits following last year’s rout. Marathon Digital, Coinbase and MicroStrategy have seen elevated levels of short bets against them for months. S3 Partners data compiled by Bloomberg showed that all three have been sporting a short interest as a percentage of equity float of 25 per cent or more. That is higher than any member of the S&P 500 Index.
Silvergate, which has about 64 per cent of its float borrowed by short sellers, jumped as much as 29 per cent on Tuesday (Jan 17) after the crypto bank reported its fourth-quarter results, which included a US$1 billion loss for the period. The crypto bank had already disclosed preliminary numbers earlier this month and announced it was firing 40 per cent of its staff.
But despite Bitcoin’s jump back above the US$21,000 level, not everyone is convinced that the rally will continue to run even higher.
“We’ve seen prices rise above US$21,000 from US$17,000 in recent days on CPI data that we believe the market interpreted as a potential tailwind for risk assets in general,” said Compass Point analyst Chase White.
“Though at this point, we believe the price increase is likely a head fake that will prove largely transitory.” BLOOMBERG
Share with us your feedback on BT's products and services
