(Bloomberg) — Stocks linked to cryptocurrencies fell Thursday, reversing early gains from the US financial regulator’s approval for exchange-traded funds that invest directly in Bitcoin.
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The landmark decision by the US Securities and Exchange Commission on Wednesday came as a game-changer for the roughly $1.7 trillion digital-asset sector, broadening access to the largest cryptocurrency on Wall Street and beyond. The SEC’s decision authorized funds from the likes of BlackRock Inc., Invesco Ltd. and smaller competitors such as Valkyrie.
Shares in Coinbase Global Inc., Robinhood Markets Inc. and miners Cleanspark Inc. and Marathon Digital Holdings Inc. were among stocks that fell Thursday, erasing premarket gains after the broader market turned lower following a hotter-than-expected inflation report. Coinbase, a crypto-equity poster child, fell 6.7% to close at about $141 per share, eating into its more than 250% in gains for the past 12 months.
Read more: Why the Bitcoin ETF Was Such a Long Time Coming: QuickTake
Now that the SEC approval has passed, industry-watchers may be mulling how much upside crypto-linked stocks have after huge gains in 2023.
Potential upside to Coinbase may be “more muted than thought, with just 1-2% benefit from custody fees and 5-10% total benefit if the ETFs drive additional spot Bitcoin trading,” Mizuho Securities USA LLC analyst Dan Dolev wrote in a note. He has an underperform rating and $54 price target on shares.
Read more: Why the Bitcoin ETF Was Such a Long Time Coming: QuickTake
Christopher Allen of Citigroup Inc. expressed a similar sentiment in a note ahead of the SEC approval where he opened a 90-day downside catalyst watch on shares of Robinhood.
“The stock has been rallying on better crypto activity, but the revenue contribution (5% of revs) is not material enough to warrant such a response in our view,” he wrote, maintaining his neutral rating and $12.50 price target on shares.
Bitcoin pared gains after topping $49,000 earlier on Thursday. The largest cryptocurrency by market value had jumped more than 160% in the past year in anticipation of the regulatory approval and the prospect for looser monetary policy.
Of course, some analysts see upside for certain companies. Wedbush Securities Inc. analysts boosted their Coinbase price target to $180 from $110 following SEC’s approval. The company is bound to benefit given its “dominant role in these ETFs,” analysts led by Moshe Katri wrote in a note dated Thursday.
Cryptocurrency stocks had rallied before the SEC’s decision, even though a false posting on the regulator’s X account that pre-empted the decision prompted a momentary selloff.
Still, the approval “marks a significant milestone,” Deutsche Bank analysts Marion Laboure and Cassidy Ainsworth-Grace wrote in a note on Thursday. While the two analysts see Bitcoin gaining throughout the year, they warned investors “not to conflate price gains with broader predictions of cryptocurrency overtaking traditional finance,” according to the note.
“For now, the spot Bitcoin ETF approval opens a new chapter for Bitcoin prices, though volatile conditions are likely to persist,” they said.
–With assistance from Alexandra Muller.
(Updates stock moves at market close.)
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