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Why Shares of Coinbase, MicroStrategy, Grayscale, and The9 Limited All Rose Today

By Bram Berkowitz - Jun 28, 2021 at 6:29PM

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These stocks have been correlated with the price of Bitcoin, which rebounded over the weekend.

What happened

Several crypto stocks rose today after cryptocurrencies rebounded this weekend, with Bitcoin (BTC -0.88%) in particular rising 15% and now trading around $34,540 per token. 

Shares of the popular crypto exchange Coinbase Global (COIN -10.77%) rose close to 10% today, while shares of the business intelligence company MicroStrategy (MSTR 0.35%) jumped 13.5%. Shares of the investment vehicle Grayscale Digital Large Cap Fund (GDLC 0.50%) climbed nearly 10% on Monday, while shares of the Chinese tech company The9 Limited (NCTY 2.58%) rose 12.6%.

So what

The general rise of stocks that operate in the crypto space appears to be linked to the rebound of cryptocurrencies over the weekend. Cryptocurrencies have been on a wild ride this year, with Bitcoin approaching $65,000 at one point before dipping below $30,000. 

Bitcoin Price Chart

Bitcoin price data by YCharts.

There have been some smaller company-specific events that have happened recently. For instance, Coinbase just gained approval to offer crypto custody services in Germany, and MicroStrategy last week added $489 million of Bitcoin to its balance sheet. But the rebound of cryptocurrencies is really what seemed to be triggering these stocks today, which makes sense given their businesses.

Picture of Bitcoin logo in a Gold and Turquoise circle.

Image source: Getty Images.

Coinbase, for instance, is one of the most popular exchanges for buying and selling cryptocurrencies. While the company makes the bulk of its revenue based on fees it collects from individual trades, this is particularly true when Bitcoin is rising because that brings more users to the platform and therefore more transactions. And for the most part, these other companies also benefit when cryptocurrencies, which often move together, trade higher.

Grayscale runs a trust that sells shares that are publicly traded. Investors buy shares and the trust buys Bitcoin, giving investors the ability to get exposure to it without having to purchase through an exchange and actually buy the tokens. The9 is a tech company that mines cryptocurrencies, while MicroStrategy is a software company that primarily holds Bitcoin instead of cash.

Now what

Not every aspect of these four companies and how they make money is necessarily linked to cryptocurrencies, but for the most part, buying these stocks is essentially making a bet on Bitcoin, which -- as we've seen this year -- can be incredibly volatile.

So if you are going to buy these stocks, you better believe in a future where the price of Bitcoin rises. I am not sure whether cryptocurrencies have reached a bottom yet, but I do believe there is a future for many of the popular ones like Bitcoin and Ether, given their ability to make payments more efficient and other real-world uses like smart contracts.

I also believe there is solid potential for crypto stocks like Coinbase. Cathie Wood, the CEO of ARK Invest, has been buying Coinbase hand over fist. It currently trades around $247 per share, and some analysts have given the stock a $600 price target. Coinbase also could eventually move less with the price of Bitcoin over time, so there's certainly long-term potential. But expect volatility and for these stocks to move heavily with the price of the cryptocurrency for the foreseeable future.

Bram Berkowitz owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool recommends MicroStrategy. The Motley Fool has a disclosure policy.

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Stocks Mentioned

MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
MSTR
$336.99 (0.35%) $1.19
The9 Limited Stock Quote
The9 Limited
NCTY
$1.59 (2.58%) $0.04
Bitcoin Stock Quote
Bitcoin
BTC
$24,057.45 (-0.88%) $-213.59
Ethereum Stock Quote
Ethereum
ETH
$1,907.93 (1.58%) $29.76
Coinbase Global, Inc. Stock Quote
Coinbase Global, Inc.
COIN
$84.00 (-10.77%) $-10.14
Grayscale Digital Large Cap Fund LLC Stock Quote
Grayscale Digital Large Cap Fund LLC
GDLC
$9.97 (0.50%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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