Crypto-Linked Stocks Rise with Bitcoin as Analyst Says Now is Not the Time to Turn Bearish

Miners Lead the Way as Crypto-Linked Stocks Rally with Bitcoin Price Increase

On Friday, miners took the lead in the crypto market’s outperformance, with Cipher Mining (CIFR), Mawson (MIGI), and Core Scientific (CORZ) among the biggest gainers. This surge in mining stocks came as the price of Bitcoin (BTC) rose more than 3% in the last 24 hours, ending the week on a positive note.

Bitcoin mining companies, which are generally more exposed to price fluctuations, saw their stocks rise by 5% to 15%. This includes Cipher Mining (CIFR), Mawson (MIGI), Core Scientific (CORZ), Sphere 3D (ANY), TeraWulf (WULF), Bitfarms (BITF), Marathon Digital (MARA), and Hut 8 (HUT). Hut 8 had been particularly hard hit earlier in the week after becoming a target of a short seller.

Other crypto-linked stocks also experienced gains on Friday. Coinbase (COIN), a popular crypto exchange, and MicroStrategy (MSTR), an enterprise software company that holds Bitcoin in its balance sheet, both saw their stocks rise between 3% and 5%. MicroStrategy, often considered a proxy for Bitcoin price, currently holds around 189,000 Bitcoin after its latest purchase in December.

Coinbase, which acts as a custodian for many spot Bitcoin exchange-traded funds (ETFs), faced a roller coaster of analyst actions this week, contributing to price fluctuations. The stock was downgraded to an underweight rating by JPMorgan earlier in the week, citing a disappointing Bitcoin ETF catalyst. However, it was upgraded to outperform on Thursday by Oppenheimer, which highlighted strong company fundamentals and a resilient management team.

The main catalyst for the week’s selloff in the crypto market was traders treating the approval of a Bitcoin ETF as a “sell the news” event. This led to a withdrawal of funds from Grayscale Bitcoin Trust (GBTC). Additionally, the slow inflow of funds into the newly approved ETFs may have added to the pressure, as it dampened the hype that had built up prior to the ETF approval. The selloff was further intensified by FTX’s bankruptcy estate dumping 22 million GBTC shares.

However, some analysts believe that the post-ETF-approval drop may be a short-term phenomenon. Markus Thielen, head of research at 10x Research, stated that even if Bitcoin ETF inflows disappoint, it is not the time to turn bearish. Thielen believes that the macro environment will continue to be a tailwind in 2024, and the US election cycle will see a constructive fiscal response that will lift asset prices higher.

Thielen added that the time to turn bearish was in early January when a correction was predicted. He suggests using any further dip in prices as an opportunity to start buying again.

Overall, the rally in crypto-linked stocks on Friday, driven by the increase in Bitcoin price, indicates a renewed bullish sentiment in the market. While there may be short-term fluctuations, analysts remain optimistic about the long-term prospects of cryptocurrencies and their associated stocks.