ENTHUSIASTS RATTLED:
Some investors fear the choppy Coinbase listing and bitcoin’s latest gyrations are part of an unsustainable, stimulus-fueled frenzy
A drop in cryptocurrency-linked shares in the wake of bitcoin’s slide and Coinbase Global Inc’s choppy debut is stirring a rallying cry from optimists, who reject fears that the sector has peaked.
A Bloomberg-curated global basket of equities linked to cryptocurrency trading or mining fell about 9 percent over the past week, paring this year’s climb to about 130 percent.
A weekend bitcoin plunge rattled enthusiasts, but the token has since pared some losses and remains up 690 percent over the past year.
Photo: Arnd Wiegmann, Reuters
“The public market validation of bitcoin and the entire space from Coinbase’s listing will encourage people who can invest in the markets to do so,” said Jehan Chu (朱沛宗), managing partner at cryptocurrency adviser Kenetic Capital in Hong Kong.
There are signs retail investors took advantage of bitcoin’s fall, he said.
Bitcoin yesterday climbed as much as 2.3 percent and it was trading at US$56,691 at 6:08am in New York.
Day traders have also pushed up shares such as bitcoin miner Marathon Digital Holdings Inc and cryptocurrency broker Voyager Digital Ltd, which are up at least 8,900 percent in the past year.
For some, the US$68 billion market value of exchange Coinbase justifies bets on a watershed advance in the adoption of cryptocurrencies. Others fear the listing and bitcoin’s gyrations are part of an unsustainable, stimulus-fueled frenzy.
“Passions run deep” on the short-term outlook, “but dips are clearly supported,” Pepperstone Group Ltd head of research Chris Weston wrote in a note yesterday.
Coinbase, the biggest US cryptocurrency exchange, was down 2.6 percent in pre-market trading after closing at US$342 on Friday last week, off a peak of US$429.54 hit in the first few minutes of its debut on Wednesday last week.
Marathon and Voyager shares were down about 20 percent last week.
In Asia yesterday shares in firms such as Japan’s Monex Group Inc, which owns a cryptocurrency exchange, and Woori Technology Investment Co, which has a stake in a leading South Korean digital-token broker, were in the red.
Cryptocurrency-linked shares also fell on the US pre-market, with Riot Blockchain Inc down 8.4 percent and Marathon slipping 7.2 percent.
The fact that more sell-side analysts would be forced to engage with the digital-token sector is a positive development for it, PwC’s Hong Kong-based global crypto leader Henri Arslanian said.
“It forces now the sell-side firms to cover Coinbase and crypto in a more practical and detailed way,” Arslanian said. “That’s going to bring not only more experience, but also more expertise in the asset class.”
Many pitfalls remain: Bitcoin’s boom could yet turn to bust, and regulators are poised to tighten oversight of digital tokens and related businesses as they achieve more mainstream acceptance.
However, for now the cryptocurrency craze continues. For instance, Dogecoin — a token created as a joke — nearly tripled to a market value of about US$50 billion on Friday last week.
Demand was so brisk that investors trying to trade it on Robinhood crashed the Web site.
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