Shares of Coinbase Global (COIN 7.66%) surged this week, adding as much as 84.7%. As of the market close on Thursday -- when the euphoria had died down -- the stock was still up 41.2%.
The catalyst that drove the crypto trading specialist higher was a significant deal with the world's largest asset manager.
In a blog post on its website, Coinbase announced that it had been selected by investment manager BlackRock (BLK -0.10%) to handle its cryptocurrency transactions via a direct connection between Coinbase Prime and BlackRock's Aladdin investment management platform. Access to Coinbase Prime "will provide crypto trading, custody, prime brokerage, and reporting capabilities to Aladdin's Institutional client base who are also clients of Coinbase."
Coinbase Prime was designed for institutional clients, providing "advanced agency trading, custody, prime financing, staking and staking infrastructure, data, and reporting that supports the entire transaction lifecycle."
The deal seemed to silence many of the naysayers and validate Coinbase's value proposition, bringing some of Wall Street's best and brightest aboard for the ride.
JMP Securities analyst Devin Ryan was "encouraged" by the news that Coinbase was chosen by BlackRock. While the deal might not have an immediate impact on revenue, it serves to have "other important implications for both the company and the crypto industry more broadly." Ryan also posits that the deal seems to confirm the trend of institutional investors staking a claim in cryptocurrency for the long term and says that Coinbase is "still executing on its longer-term plans and playing offense."
Even well-known short-seller Andrew Left of Citron Research was impressed. In a post on Twitter, he called the deal a "huge validation ... just shot down many bear cases on that particular stock."
The bear market and the corresponding "crypto winter" have made it a tough year for Coinbase stock, which is currently down 75% from its high late last year -- primarily due to the broad exodus of fair-weather cryptocurrency traders.
However, if this deal is any indication, Coinbase is playing the long game, which will benefit its investors over time.