Companies with bitcoin exposure jumped on Wednesday in lockstep with the broader cryptocurrency rally ahead of the highly anticipated direct listing of Coinbase.
“The Coinbase IPO is being met with excitement that global crypto market cap will grow by at least 50% later this year,” Edward Moya, senior analyst at OANDA, told Insider. “Each legitimate investment vehicle for cryptocurrencies is solidifying the belief that this bubble won’t come crashing down to zero.”
“All four of these have a direct benefit from bitcoin being up,” John Wu, president of Ava Labs, the company beside altcoin Avalanche, told Insider. “Others like PayPal who help facilitate the trading of crypto are up because of sentiment but they don’t actually own bitcoin.”
Wu said the stocks are now trading lower since investors are “buying the hype, selling the fact”. He added that investors may now be allocating ay from these names to the cryptocurrencies themselves.
Coinbase CEO Brian Armstrong on Wednesday during his interview with CNBC made the case as to why the public should invest in his firm rather than straight to the cryptocurrencies.
“We are kind of what you might call an index bet or a levered bet on the crypto space more broadly,” he said.
As for Square, its founder and CEO Jack Dorsey has long been one of the staunchest advocates of bitcoin. In October 2020, Square announced it had purchased 4,709 bitcoins for an aggregate price of $50 million. The San Francisco-based company paid an average price of $10,617 for each bitcoin.
The Coinbase direct listing on the Nasdaq prompted a broader cryptocurrency rally.
“Bitcoin and the other top altcoins are making fresh record highs as large parts of Wall Street are finally drinking the Kool-Aid,” Moya said.
The Coinbase direct listing is viewed by many cryptocurrency advocates as a milestone for the digital ecosystem as it looks to continue to make headway into mainstream financial markets.
“Coinbase is the first crypto company to make mainstream waves and is already valued higher than historic financial institutions like JP Morgan. This, coinciding with crypto’s market cap surpassing 2 trillion, provides the space with much-needed stability that will reassure retail investors,” Ganesh Swami, co-founder and CEO of Covalent, a provider of blockchain data, told Insider.
The stocks were all up during premarket trading but had pared some gains late Wednesday morning. Here’s where the stocks traded as of 10:51 a.m. ET:
HSBC has said it will prevent clients from purchasing and moving shares of MicroStrategy into their InvestDirect accounts, according to a March 29 message viewed by Reuters that referred to the stock as a “virtual currency product.”
The decision comes amid a broader move by HSBC to limit cryptocurrency trading.
“HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from VCs (virtual currencies),” HSBC said in the same statement viewed by Reuters.
HSBC did not immediately respond to Insider for comment.
HSBC’s move goes against the wave of institutions and major corporations adopting bitcoin. Heavyweights including Goldman Sachs, Bank of New York Mellon, Tesla, PayPal, and Visa have started facilitating transactions in the coin, or accepting it as payment.
“As of 4/5/2021, we #hodl ~91,579 bitcoins acquired for ~$2.226 billion at an average price of ~$24,311 per bitcoin,” Saylor said in the tweet.
MicroStrategy was the first corporation to directly purchase bitcoin, and made its last purchase on March 12.
Saylor has long been an advocate of digital currencies, especially bitcoin, and has been vocal about his stance. The bitcoin evangelist in February this year said 2021 is the “year of institutional investment” in cryptocurrency.
MicroStrategy first made a $250 million bitcoin purchase in August of 2020 and announced that it was using existing cash on its balance sheet to acquire more of the digital currency.
Bitcoin this year been embraced by major institutions including Goldman Sachs, BNY Mellon, Tesla, PayPal, and Visa.
The world’s most popular cryptocurrency is trading lower on Monday by 0.258%, to $58,049 after flirting with the $60,000 last week. The digital asset has a market capitalization of around $1.1 trillion.
Late last year, in response to a tweet from Musk with a lewd meme about bitcoin, Saylor said he should do Tesla’s shareholders a “$100 billion favor” by converting the company’s balance sheet from dollars to bitcoin. “Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1 trillion favor,” he said.
Musk asked whether such large transactions were possible. Saylor replied that they were and that he was willing to share his playbook with the Tesla boss.
A little over a month later, Tesla revealed its biggest bitcoin endorsement to date. It announced that it would invest $1.5 billion in the world’s most popular cryptocurrency and soon accept crypto payments for its products. The automaker used the crypto exchange Coinbase to make its bitcoin purchase, according to The Block.
Saylor called Tesla’s move an “inflection point,” adding that the narrative about belief in bitcoin quickly changed from skepticism to growing acceptance. He said that while it wasn’t “appropriate business decorum” to comment on conversations with a CEO of another public company, their Twitter exchange likely affected Tesla’s decision.
Saylor pushed back on the idea of bitcoin as an example of irrational investor exuberance, involving enthusiasm about news of price increases.
“If you’re looking for an example of real speculation, it would be people speculating upon whether they can squeeze others in a short squeeze and a small stock, like GameStop,” he said. “Bitcoin is not speculation, OK? Bitcoin is a unique new technology, it’s like the Facebook of money or the Google of money. And it grew from nothing to a trillion dollars in monetary value in 12 years.”
Bitcoin traded flat at $57,380 in early European trading on Monday. It’s up about 95% year-to-date and more than 885% in the past 12 months.
Bitcoin regained its composure this week to jump to a record high above $60,000, with many analysts pointing to a new wave of institutional interest as the driver.
Goldman Sachs restarting its crypto desk, JPMorgan launching a “crypto exposure” product, and crypto firm NYDIG raising money from Morgan Stanley and others are the latest signs of growing interest in bitcoin.
Skeptics argue that bitcoin is too volatile for investors to start buying in any meaningful quantities and has next to no use value, putting it in line for another collapse.
But a rising number of firms are testing the crypto-waters. Bitcoin enthusiasts argue that “this time is different” for the world’s biggest cryptocurrency, because big-name firms are supporting the price and lending legitimacy to the project.
Here’s a rundown of some of the major players taking steps towards bitcoin.
12 March: MicroStrategy buys another $15 million
Michael Saylor’s business intelligence firm MicroStrategy bought another $15 million worth of bitcoin, it said on Friday. It brought the company’s total holdings to 91,326 units, worth around $5.3 billion on 12 March.
Saylor has long advocated companies investing their cash in the cryptocurrency, and first bought bitcoin in August 2020.
Reuters reported that Goldman would restart its crypto desk and begin dealing bitcoin futures and non-deliverable forwards for clients in March.
The bank’s chief operating officer John Waldron said later in March that “client demand is rising” for bitcoin. And Goldman survey of nearly 300 clients found 40% had exposure to cryptocurrencies.
February 23: Jack Dorsey’s Square buys $170 million more bitcoin
Twitter boss Jack Dorsey’s fintech company Square bought another 3,318 bitcoins for $170 million. That took its holdings to more than 8,000, worth upwards of $450 million on 12 March.
February 18: First North American bitcoin ETF launches
Canada has now approved 3 bitcoin ETFs, but the US is yet to approve any. Experts say ETFs could spur further rises in the bitcoin price by allowing more institutions to invest.
Canada’s Purpose Bitcoin ETF, the first to launch, had 913 million Canadian dollars ($731 million) under management on 11 March.
February 11: BNY Mellon plans to issue, hold and transfer clients’ bitcoin
Bank of New York Mellon plans to issue, hold, and transfer clients’ bitcoin, The Wall Street Journal reported. America’s oldest bank will soon allow digital currencies to be treated the same as more orthodox investments in its asset-management system.
February 10: Mastercard will allow merchants to accept select cryptocurrencies
Mastercard will begin allowing customers to use some cryptocurrencies on its network later this year, although it did not specify which.
“We are preparing right now for the future of crypto and payments,” Raj Dhamodharan, executive vice president of digital asset products said in a blog.
February 8: Tesla says it invested $1.5 billion in bitcoin
Elon Musk’s Tesla powered a jump in the bitcoin price by announcing it had invested $1.5 billion in bitcoin in January. It also said it plans to accept bitcoin as payment.
Some critics said the bet had exposed the automaker to “immense” risks that could hammer its profits if the bitcoin price plunges.
January 21: BlackRock authorizes funds to invest in bitcoin futures
The $8 trillion asset manager BlackRock has authorized two of its funds to invest in bitcoin futures, according to January filings with the Securities and Exchange Commission.
November 27: Guggenheim reserves right to invest in Grayscale Bitcoin Trust
Guggenheim disclosed in an SEC filing that its Macro Opportunities Fund held the right to invest up to 10% of its net asset value in Grayscale Bitcoin Trust.
The Grayscale trust, the world’s biggest bitcoin fund, has become a key way for institutional investors to gain exposure to the cryptocurrency.
October 21: PayPal announces it will let customers buy and sell bitcoin
The firm’s bitcoin holdings were worth roughly $5.26 billion as of March 11’s price per coin. Saylor’s firm acquired its bitcoin for some $2.211 billion at an average price of around $24,214 per bitcoin.
Michael Saylor has long been an advocate of digital currencies, and particularly bitcoin. The CEO even held a conference called “bitcoin for corporations” on February 4 to attract more institutional investment. Saylor said he held the conference by “popular demand” after getting so many questions from fellow CEO’s about his company’s bitcoin purchases.
MicroStrategy first bought into bitcoin with a $250 million purchase back in August of 2020.
Since then, Saylor changed MicroStrategy’s treasury reserve policy in order to make bitcoin the company’s treasury reserve asset and then continued his entry into the digital currency market.
Saylor purchased $50 million of bitcoin on December 4, then quickly followed with a December 8 $400 million bitcoin buy.
When MicroStrategy ran out of funds to buy bitcoin, Saylor turned to debt offerings to feed the habit. On February 17, MicroStrategy’s convertible debt offering hit $900 million and the firm used the proceeds to buy more bitcoin.
Since then, MicroStrategy has used bitcoin sell-offs as buying opportunities, and now the company’s digital asset holdings are nearing 100,000 bitcoin.
MicroStrategy’s business plan and operations have taken a back seat to its bitcoin purchases lately. The company boasts a market cap of roughly $7.71 billion as of March 12, but turned in revenues of just $480 million in 2020 while posting a net loss of roughly $7.5 million, according to SEC filings.
MicroStrategy traded down 4.70%, at $770 per share, as of 9:38 a.m. ET on Friday.
The publicly-traded business intelligence company revealed an additional $10 million bitcoin bet in a filing registered with the Securities and Exchange Commission on Friday.
The company said it bought about 205 bitcoins at an average price of $48,888 per coin, inclusive of fees and expenses.
As of March 5, MicroStrategy holds about 91,065 bitcoins that were purchased for $2.2 billion at an average price of $24,119 per coin. The total value of its bitcoin holding at the time of writing would equate to $4.4 billion.
The price of bitcoin hovered around $48,325 on Friday. Its price has fallen 8% in the past week, alongside rises in bond yields, but is still up 70% year-to-date. “Bitcoin remains highly correlated with bond prices,” said Edward Moya, a senior market analyst at OANDA. “The bond market selloff is showing some signs of stability and that could mean the bitcoin pullback is nearing its end.”
Bitcoin had a momentous run in February, from catapulting to a market capitalization of $1 trillion to smashing the $58,000-mark.
The month also saw heavyweight institutions such as Tesla and Mastercard embrace the cryptocurrency, while MicroStrategy reinforced its support for bitcoin by adding to its existing pile.
In Febrauary, the price of bitcoin jumped more than 50%. As of Friday 4 pm ET, bitcoin was trading lower by 5.54% to $46,515, a 15% fall compared to Friday last week.
Yet, Pankaj Balani, CEO at cryptocurrency derivatives exchange Delta Exchange, said the case for a stronger rally in bitcoin remains intact despite the recent correction.
“This is only the second correction in bitcoin prices since November when bitcoin broke above its previous all-time high and started a fresh rally,” he said. “One can expect a short-term consolidation in the price of bitcoin around here.”
Balani noted that the $40,000 level has become a strong psychological support for the digital coin and will be difficult to break in the short term.
Paolo Ardoino, CTO of Bitfinex, a cryptocurrency exchange, said such price movements are to be expected in a nascent space. Ardoino foresees the same volatility in March but remains optimistic about the value of the asset.
“As we move into March and through 2021, bitcoin will continue to find its ground, and we will continue to experience fluctuations and volatility,” he said. “We should see more mainstream adoption, with the continued entrance of major traditional financial players onto the scene.”
Alex Zhao, CEO of Standard Hashrate Group, the project team behind the bitcoin Standard Hashrate Token, echoed the sentiment.
“Our members now share the prospect that bitcoin price will reach $100,000 before the end of 2021,” he said. “We generally foresee an abrupt rise in bitcoin price in March 2021. This is in large part due to the continued quantitative easing, particularly in the US. Hedge funds and corporations will continue to buy more bitcoin.”
Meanwhile, Jeffrey Wang, head of Americas for Amber Group, a cryptocurrency financial services firm, said he believes most bitcoin investors are in it for the long haul.
“I believe a lot of the earlier adopters that have held bitcoin for years aren’t looking to sell at levels near here but much higher, north of $100,000 if at all,” Wang said. “I look at the next major milestone to be $75,000 where there should be some resistance.”
Through its ups and downs, here is a quick look back at bitcoin’s record-breaking rally in February.
A European Central Bank governing council sounded an alarm for bitcoin investors. “If people want to invest in bitcoin, they have to be prepared to lose all their money – that’s certainly my view,” said Gabriel Makhlouf, a governing council member of the ECB.
Tesla announced it invested $1.5 billion in bitcoin, pushing the price up 16% to a record $44,795. Tesla also unveiled plans to accept the cryptocurrency as payment in the near future.
Bitcoin soared above $48,000 for the first time, riding the rally sparked by the Tesla announcement.
The ECB’s Christine Lagarde said she does not consider bitcoin a real currency and will not be holding it as reserve currency anytime soon. “It’s very unlikely – I would say it’s out of the question,” Lagarde said.
US Treasury Secretary Janet Yellen also criticized bitcoin. “I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” she said.
Bitcoin surged to an intraday high of $48,364 following continued buy-in from major players. It was the second time the world’s most popular cryptocurrency blew past the $48,000-mark in one week.
Elon Musk posted a vague tweet with an image of a ring with the logo of bitcoin earlier in the day.
Twitter CEO and a longtime bitcoin advocate Jack Dorsey announced a partnership with Jay-Z to start a bitcoin endowment that will focus on developing the cryptocurrency in India and Africa. “It’ll be set up as a blind irrevocable trust, taking zero direction from us,” Dorsey said.
On the same day, Andrew Yang said he would make New York City a hub for bitcoin if elected mayor. “As mayor of NYC – the world’s financial capital – I would invest in making the city a hub for BTC and other cryptocurrencies,” the former presidential candidate said in a tweet.
BitPay floated the possibility of its bitcoin cards being added to their Apple Wallet, giving cryptocurrency holders a new way to spend via Apple Pay. “We have thousands of BitPay Wallet app customers using the BitPay Card who are always looking for new places and ways to spend their crypto,” said Stephen Pair, CEO of BitPay.
Bitcoin jumped above $50,000 for the first time, bringing its year-to-date gain to 74%. The cryptocurrency rose nearly 5%, to $50,547.
Bitcoin hit another record high, climbing above $51,700 for the first time and bringing its market capitalization close to $1 trillion.
MicroStrategy increased its convertible debt offering from $600 million to $1 billion. The software technology company owned nearly 71,000 bitcoin to date since it began purchasing bitcoin last summer.
Bitcoin continued its rally to just above $52,600.
Later in the day, payments company Square announced it bought more bitcoin, adding 3,318 coins at an aggregate purchase price of $170 million. The payments company now owns 8,027 bitcoins, representing about 5% of its total cash.
MicroStrategy CEO Michael Saylor said the company is considering issuing more debt in order to buy addtional bitcoin.
“We’ve been pretty clear that we’ll consider equity and debt financings,” Saylor said, speaking as part of a panel for the Bloomberg Crypto Summit Thursday. “It makes sense to buy as much of that asset class as we can,” he said.
The software technology company was the first corporation to directly purchase bitcoin, driven by Saylor’s view of the digital asset as a hedge against a potential devaluation of the US dollar.
Saylor on February 24 announced on Twitter that his company purchased an additional 19,452 bitcoins for an estimated $1.026 billion in cash at an average price of $52,765 per bitcoin.
MicroStrategy owns 90,531 bitcoins as of February 24, investing at roughly $2.2 billion in total since it started purchasing the digital asset in August. Thus far, the company has issued two rounds of convertible bonds to purchase more of the coins.
Saylor also pointed to the cryptocurrency’s finite number as one of the factors that make bitcoin valuable. There are only 21 million bitcoins, and 18 million have been mined so far.
“If you want to preserve shareholder value, you have to hold scarce assets,” he said. “Bitcoin is the most liquid, scarce, uncorrelated asset you can buy.”
Bitcoin’s pullback slashed as much as 23% from shares of crypto bull Michael Saylor’s MicroStrategy on Wednesday.
Although MicroStrategy doesn’t mine bitcoin itself, the business intelligence firms is one of only a few companies to buy into bitcoin in a big way. MicroStrategy owns 71,079 bitcoins, worth an estimated $3.21 billion at current prices.
For reference, the company’s market cap is $9.25 billion as of Wednesday, meaning MicroStrategy owns a third of its net value in Bitcoin.
MicroStrategy acquired the majority of its bitcoin in 2020 at prices well below current levels. In fact, according to a press release from the company, it owned 70,470 bitcoins as of Dec 21, which were acquired at an aggregate purchase price of approximately $1.125 billion or $15,964 per bitcoin.
Saylor’s business intelligence firm has seen a monumental 732% rise in share prices during the past six months as bitcoin climbed.
And when Tesla announced a $1.5 billion investment in the cryptocurrency on Monday, sparking newfound hope for institutional investment, a move to record highs of over $48,000 helped MicroStrategy break the $1000 per share mark.
Michael Saylor has been at the forefront of a move by institutions into Bitcoin for some time and that position was solidified after he held a “Bitcoin for Corporations” conference on February 3 and 4.
In an interview with Ran Neuner, former host of CNBC’s “Crypto Trader,” Saylor said 7,000 companies and around 8,500 people attended the event, exceeding his expectation of 2,000 attendees.
Saylor also noted he held the event “by popular demand” after he was asked for “thousands” of meetings from prospective institutional bitcoin buyers to discuss legal, logistical, and security details.
Tesla and Microstrategy may entice other corporate treasuries to hold bitcoin, but the move is risk. JPMorgan strategists led by Nikolaos Panigirtzoglou warned clients of the potential for increased volatility if companies start holding significant amounts of bitcoin.
“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin. The addition of BTC would cause a big increase in the volatility of the overall portfolio of large companies. BTC allocation could mean the portfolio’s volatility rises to 8% due to Bitcoin’s 80% annualized volatility,” the research note states.
MicroStrategy traded down 22%, at $990.66, as of 3:53PM E.T. on Wednesday.