What impact are Bitcoin and Ethereum rallies having on crypto-related stocks, and will this uptrend continue?

After weeks of bearish sentiment and market consolidation, the crypto market has returned in the last 24 hours.

Bitcoin (Bitcoin) surpassed the $70,000 mark, trading at $71,000 on May 21. Ethereum (ETH) experienced an even more dramatic situation ascendjumping more than 20% to trade above $3,700.

This rally follows a key announcement from Eric Balchunas, a senior analyst at Bloomberg, who raised the odds of an Ethereum exchange-traded fund (ETF) approval from 25% to 75%.

To update: @JSeyff and I’m increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing talk this afternoon that the SEC could be doing a 180 on this (increasingly political issue), so now everyone is scrambling (as we , everyone assumed they would be denied). To see… https://t.co/gcxgYHz3om

-Éric Balchunas (@EricBalchunas) May 20, 2024

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

Bullish sentiment is even more evidenced by optimism among hashrate futures traders. Hashrate Index analysts predict an increase in the price of hash over the next six months. They expect Bitcoin transaction fees to increase and the price to continue to grow.

📢 HASHPRICE AND HASHRATE MARKET UPDATE!

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

Optimistic hashrate traders expect the hash rate to rise in the next 6 months. They anticipate that difficulty may decline/stagnate, the transaction… pic.twitter.com/4ZLgN6Jxyp

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

This sentiment is supported by their recent post on half.

In response to the positive momentum in the crypto market, crypto-related stocks also saw substantial gains.

Coinbase (COIN) rose 9% on May 20, reaching $225. Similarly, MicroStrategy (MSTR) also rose 9% to trade at $1,727, suggesting that the bull in the crypto market is spreading for stocks linked to the crypto sector.

In light of these developments, let’s look at the recent performance of these stocks and what we can expect next.

What is happening with Coinbase?

Despite experiencing a decrease in revenue in 2022 compared to 2021, Coinbase become the 340th most valuable company in the world, with a market value of more than US$55 billion in May 2024.

Source: Market Capitalization of Companies

After hitting a low of $47 per share in June 2022, Coinbase’s share price rose to $225 on May 20, representing a 378% increase. Over the past year, the stock has risen more than 268% and is up more than 113% in the past six months.

Source: Google

In 2023, Coinbase reported revenue of $3.97 billion, a decrease from the $7.83 billion reported in 2021. However, the company’s revenue in the first quarter of 2024 shot to $1.6 billion, marking a 72% increase from the previous quarter.

This increase in revenues and share price is primarily driven by an increase in transactions, thanks to the broader crypto market recovery and a favorable change in crypto accounting rules.

The company’s net income for the first quarter of 2024 was $1.18 billion, or $4.40 per share, a turnaround from the year-ago loss of $78.9 million, or 34 cents per share .

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

The company also benefited from the rise in BTC and ETH prices during the first quarter. Bitcoin hit a new record above $73,000 in March, while ETH underwent its first major upgrade in over a year. These events led to an increase in trading volumes and demand for Coinbase’s services.

Additionally, Coinbase has positioned itself as a key player in the institutional investor space, particularly since spot approval Bitcoin 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, ranked as the 654th most valuable company in the world by market cap as of May 2024, has experienced notable fluctuations in its market value over the years.

Between 2020 and 2024, the company’s market value emerged from US$3.60 billion to US$30.63 billion, marking a 750% increase. This increase is particularly impressive considering that the company’s market capitalization decreased by 73.42% to $1.63 billion at the end of 2022.

Source: Market Capitalization of Companies

The company’s share price also tells an interesting story. Between 2000 and 2020, MSTR’s share price remained relatively stagnant, hovering between $100 and $150, without much of a recovery.

Source: Google

However, since 2020, the share price has been on a steady rise, gaining more than 1,180% in the last five years and almost 500% in the last year alone, trading at $1,727 on May 20.

Despite these positive trends, MicroStrategy’s revenue has experienced some fluctuations. In 2023, the company reported revenue of $0.48 billion, a decrease from the $0.51 billion reported in 2021. Similarly, the company’s 2022 revenue decreased to $0.49 billion, of US$0.51 billion in 2021.

MicroStrategy’s price-to-earnings ratio (P/E ratio) is another metric worth noting. According to the latest financial reports, the company’s P/E ratio is 200.144, a sharp increase from -1.09 at the end of 2021.

The high P/E ratio indicates that investors are willing to pay a premium for MicroStrategy’s earnings, possibly due to the company’s strong performance and growth potential. However, stocks with a high P/E often carry substantial risk.

A key factor contributing to MicroStrategy’s recent success is its substantial bitcoin holdings. As of the first quarter of 2024, the company held 214,400 bitcoins, valued at approximately $15.26 billion as of May 21.

These holdings, acquired at an average cost of $35,180 per bitcoin, generated a profit of about $7.76 billion for MicroStrategy.

Meanwhile, MicroStrategy Addition to the MSCI World Index further validates its position as a key player in the stock market.

The MSCI World Index is a broad global stock market index comprising nearly 3,000 companies from 23 developed countries and 24 emerging markets. MicroStrategy’s inclusion in this index suggests increasing 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 value as of May 2024, has experienced extreme volatility in its market value over the years.

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

Source: Market Capitalization of Companies

The company’s revenue trends also reveal an interesting narrative. Marathon revenue in 2023 is $0.38 billion, an increase 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 several factors, including operational challenges, unexpected equipment failures, transmission line maintenance, and weather-related drawdowns at its mining sites.

Meanwhile, Marathon’s stock performance over the years has been strong, with the share price rising nearly 617% in the last five years and approximately 121% in the last year.

Source: Google

In the first week of May, Marathon shares were listed by S&P Global, a crucial milestone for the company. Despite this positive development, Marathon faced operational challenges in the first quarter of 2024, mining just 2,811 Bitcoins, a 34% decrease from the previous quarter.

As a result, the Marathon reported Q1 earnings per share (EPS) of $1.26, well above Wall Street estimates of $0.02. However, this number included a favorable mark-to-market adjustment due to the FASB’s recently approved fair value accounting rules and the recent rise in bitcoin prices, making comparison with forecasts complex.

Amid these challenges, the company remains optimistic about its future, maintaining its 2024 guidance of increasing to 50 exahash per second (EH/s) and anticipating 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 trajectory, we can expect a ripple effect benefiting cryptocurrency-related stocks. On the other hand, any downturns will likely have an adverse impact on these stocks.

Momentum is currently positive, with Bitcoin trading well above $70,000 and Ethereum experiencing a huge increase, reaching around $3,700.

A critical factor to watch out for is the potential approval of an Ethereum ETF. If approved, it would be a strong bullish signal, likely driving prices even higher and generating more investment in cryptocurrencies and related stocks.

Despite the optimistic outlook, you should exercise caution. The crypto market is notoriously volatile and sudden changes can lead to substantial losses.

Diversifying investments and having a clear risk management strategy are essential to navigating the uncertainties in this space. Never forget the golden rule of investing: never invest more than you can afford to lose.

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