Coinbase’s BlackRock pact reinforces crypto status, burns shorts

The crypto winter that has dogged Coinbase Global Inc. for nearly nine months might finally be showing signs of thawing.

Shares of the largest US exchange surged as much as 44% on Thursday, the most intraday since its 2021 direct listing, after announcing a partnership with Inc. to help institutional investors manage and trade . The rally puts the stock on track for a third straight day of gains and sets it up for a record weekly rally.

For Coinbase investors, the news is a much-needed signal that its status as a giant in the crypto sector remains rock solid. To be sure, shares are still deeply in the red this year, down more than 60%.

“After this validation, it is possible that Coinbase will be able to partner with more traditional financial industries,” said Owen Lau, an analyst at Oppenheimer & Co. “It shows that even with the size of BlackRock, they are going to partner with a crypto-native company, rather than building their own capabilities.”

The sudden surge added $6 billion in value to the company’s market capitalization, bringing it back above $20 billion for the first time since mid-May. While that’s more than double the size of rival Robinhood Markets Inc., it’s a far cry from the peak valuation near $75 billion from Novmeber, when was trading at a record high.


The company has faced a wave of headwinds in recent months as its trading volumes dwindled amid a plunge in the price of and other digital tokens. It’s also facing a probe from the and Exchange Commission into whether it improperly lets US customers trade assets that should have been registered as securities.

Short sellers, meanwhile, are taking a beating as the stock extends its sharp rebound from July. While shorts are still up more than $800 million this year in mark-to-market profits, those returns are 40% lower than they were prior to Thursday’s jump, according to S3 Partners’ managing director of predictive analytics Ihor Dusaniwsky. “We expect continued short covering in Coinbase as BlackRock’s announced partnership puts a python-like squeeze on short sellers,” he said.

Shares sank more than 21% on July 26 after funds controlled by Cathie Wood sold roughly $1.4 million of stock in the company holdings, worth about $75 million at the time.

Thursday’s move is also notable because it comes on a day when prices of Bitcoin, Ether and other popular digital assets are all lower. The stock has maintained a tight correlation to the world’s largest since it began trading last year.

Other cryptocurrency-related stocks were also higher following the deal, with firms including Marathon Digital, Riot Blockchain and Silvergate Capital all rising at least 5%.

“This is much-needed positive news for crypto traders and should provide some optimism for the longer-term health of the cryptoverse,” said Ed Moya, senior market analyst at Oanda. “Calls that crypto is dead have been overdone.”

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link

Comments are closed.