Crypto Stocks Falter as Coinbase Buckles 10% Despite Bitcoin Topping $45K

Shares of Coinbase, one of the largest cryptocurrency exchanges, experienced a significant decline on Tuesday despite the strong performance of Bitcoin. This decline came as a surprise to many, as Bitcoin rallied to a 21-month high. Coinbase’s stock fell by 9.8% during the first trading session of the year, closing at just under $157.

The decline in Coinbase’s stock price follows a period of substantial growth in 2023, where the stock price nearly quintupled. However, it seems that investors engaged in profit-taking at the end of the year, leading to the recent drawdown. Even with the decline, Coinbase’s stock has still nearly doubled in price over the last 10 weeks.

Bitcoin miners also experienced a similar trend, failing to benefit from the rally in Bitcoin. Marathon Digital and Riot Platforms, two prominent Bitcoin mining companies, saw their stock prices decrease by 1%-2% from Friday’s close and nearly 10% lower than their opening price.

Interestingly, MicroStrategy, a company known for its significant Bitcoin holdings, managed to buck the trend and closed with a 7.9% gain. This positive performance amidst the decline in crypto stocks highlights the volatility and unpredictability of the cryptocurrency market.

The decline in crypto stocks, including Coinbase, occurred as Bitcoin spiked above $45,000 for the first time since April 2022. Market participants were buying Bitcoin in anticipation of imminent regulatory approval for a spot Bitcoin exchange-traded fund (ETF) in the United States. Analysts predict that the approval of such ETFs could significantly expand the investor base for Bitcoin, with Galaxy forecasting over $14 billion of inflows in the first year alone.

Despite the initial spike, Bitcoin’s price retreated from the day’s highs and settled around $44,900 at the time of writing. Nonetheless, it still recorded a 3% increase over the past 24 hours.

10x Research, a Singapore-based firm, released a report stating that crypto stocks appeared overvalued compared to Bitcoin after their explosive gains in the last quarter of 2023. Many shares doubled or even more in value during the final weeks of the year. Coinbase, for example, saw a 150% rally from late October to a high of $187 on December 27.

In conclusion, Coinbase and other crypto stocks experienced a significant decline despite the strong performance of Bitcoin. This decline followed a period of substantial growth, leading to profit-taking by investors. The approval of a spot Bitcoin ETF in the United States is expected to attract a broader investor base to the cryptocurrency market. However, the volatility and overvaluation of crypto stocks remain concerns for investors.