Bitcoin (BTC +0.13%) was the talk of the crypto market again on Wednesday and has passed the $1 trillion market cap mark once again. Bitcoin is up 5.3% in the last 24 hours as of 3 p.m. ET.
Following Bitcoin's move is Coinbase Global (COIN 0.98%), which jumped as much as 14.5% in trading today, and MicroStrategy (MSTR 2.40%), which jumped 12.8%. The two stocks are currently up 13.7% and 12.2% respectively.
CRYPTO: BTC
Key Data Points
Bitcoin's move
The value of Bitcoin is up for several reasons today. First of all, investors are generally more bullish on the economy and earnings, which is pushing up the value of higher-risk assets like growth stocks, and Bitcoin often trades alongside growth stocks.
But there's also a lot of money flowing into Bitcoin through exchange-traded funds (ETFs). BlackRock's iShares Bitcoin Trust alone has gone from 2,621 Bitcoins as of Jan. 11, to 105,280 Bitcoins held as of the market close on Tuesday, Feb. 13. That amount of money piling into the industry is sure to push Bitcoin higher.
How Coinbase and MicroStrategy make money from Bitcoin
MicroStrategy is an obvious beneficiary after reporting it held 190,000 Bitcoins with an average purchase price of $31,224 as of Feb. 5. This company has long been a leveraged play on the price of Bitcoin and with purchases continuing that's the case more than ever.
Coinbase is in a little different position, as it provides services and trading for cryptocurrencies around the world. And it happens to be the custodian for the vast majority of Bitcoin ETFs, including BlackRock's.
Another business Coinbase is involved in is prime brokerage, which means it's the trading platform that holds cryptocurrencies for institutional investors. So, if money is flowing into crypto from institutions, it's likely Coinbase is going to make money from both custodial and trading fees.
Cryptocurrencies can give and take away
It's important to remember that cryptocurrencies can be very volatile and Bitcoin's position as "digital gold" in the crypto ecosystem isn't guaranteed. Traders have bid up Bitcoin in anticipation of not only ETFs, but also the next halving coming in around two months, which has been a catalyst for prices in the past.
I think investors should be looking at where there's utility being built on the blockchain, and this is where I think Coinbase is well positioned. The company has one of the largest trading platforms in the world, is the custodian of choice for large institutions, and is building blockchain solutions like its Base blockchain and crypto wallets.
Speculating on crypto can lead to strong days like today and long dark periods like we had in 2022. That's why I think the infrastructure plays like Coinbase are a better place to be.
