What happened
Shares of several crypto stocks rallied today along with the broader cryptocurrency market. Cryptocurrencies seemed to be enjoying a nice bump like the rest of the stock market, as tensions between Russia and Ukraine ease, at least for the time being.
Shares of the large cryptocurrency exchange Coinbase Global (COIN -0.34%) traded 5.6% higher as of 11:28 a.m. ET today, shares of the crypto bank Silvergate Capital (SI -20.00%) traded nearly 7% higher, and shares of the Bitcoin-mining company CleanSpark (CLSK -1.21%) traded nearly 14% higher.
So what
Earlier this morning, news outlets reported that Russia had withdrawn some of its troops from the Ukrainian border, although troops remain and the situation still seems uncertain. The Associated Press reported this morning that Russian President Vladimir Putin is ready to discuss security proposals with the U.S. and NATO. It's still unclear if a Russian invasion is off the table, but the escalation of tensions between the two countries seemed to arise quickly and catch the broader market off guard.
Image source: Getty Images.
Like tech stocks, cryptocurrencies seem to be taking some relief from the news. In fact, cryptocurrencies, in general, have traded more in line with tech stocks since last November when the threat of inflation and several rate hikes by the Federal Reserve this year became much more of a reality. Because Coinbase, Silvergate, and CleanSpark are all in the crypto space, they tend to have a correlation with the broader crypto market in terms of price movement.
But there is also other news that may be supporting the rising prices of these stocks. Although Coinbase has struggled since going public, analysts continue to be bullish on the stock. Loup Funds analyst Gene Munster recently said he thinks Coinbase has the potential to be a "generational" company. The median price target among analysts is $342, which implies serious upside from the stock's current share price of about $207. Despite the app crashing, I would also consider Coinbase's Super Bowl ad a success, given how much attention it drew.
Silvergate, a bank that has developed a real-time payments system to better facilitate cryptocurrency trading among institutional investors and exchanges, announced today it has built a similar payments system for the real-time transfers of euros. Customers will be able to also convert euros to U.S. dollars instantly. As the first bank to launch a real-time payments system like this, Silvergate already has a first-mover advantage, so this should enable the company to keep expanding its client base and make the network more attractive to join.
CleanSpark is coming off record quarterly results that it reported recently, and also said it is contemplating selling its legacy energy business so it can focus on Bitcoin mining.
Now what
Being in the crypto space, investors need to always consider what is going on in the broader crypto market when looking at the price movements of these stocks.
But I am certainly intrigued by Coinbase and Silvergate Capital, which look to be building innovative business models that can stand apart from the rest of the industry. Coinbase will benefit as crypto adoption continues and if it can continue to diversify revenue.
I also am very optimistic about Silvergate Capital. The payments system it has created combined with the bank charter it already has creates a very compelling business model, and the payments network already has more than 1,380 customers on it. Meanwhile, the bank also recently bought the assets of Meta Platform's planned U.S. dollar stablecoin project, Diem, which could be a huge opportunity if the bank can navigate the regulatory landscape and successfully launch the project.
