Here’s What You Missed in Crypto This Week

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

CRYPTO FIRMS REPORT EARNINGS: On Monday, MicroStrategy (MSTR) reported a first quarter loss per share of ($3.09), which compared to earnings per share of $31.79 for the same period last year. The company also reported Q1 revenue of $115.2M, which compared to analyst consensus of $121.72M. “As the world’s first Bitcoin Development Company, MicroStrategy is committed to the continued development of the bitcoin network through our activities in the financial markets, advocacy and technology innovation. It is through our unique bitcoin strategy and solid track record as an operating company that we now hold 214,400 bitcoins at an average purchase price of $35,180 per bitcoin,” said Phong Le, CEO. As of March 31, the carrying value of the company’s digital assets was $5.074B. (read more)

On Tuesday, Canaccord lowered the firm’s price target on MicroStrategy to $1,590 from $1,810 and kept a Buy rating on the shares. The firm said the company’s strategy was again in full swing in Q1 during what was a milestone quarter given the approvals of US-listed spot BTC ETF approvals. The firm said with the recent halving event of BTC, the amount of new bitcoin mined per day has been reduced by 50% and as a result they believe the supply/demand setup remains active. (read more)

On Wednesday, Riot Platforms (RIOT) reported Q1 EPS of 82c on revenue of $79.3M, which compared to analyst consensus of a loss per share of (14c) on revenue of $94.86M. The company produced 1,364 bitcoin during the quarter. Jason Les, CEO, said, “This quarter, Riot reported net income of $211.8M and earnings per share of $0.82 which are new record highs for our quarterly results…Last month, Riot also announced the energization of our Corsicana Facility, which we believe will be the largest dedicated bitcoin mining facility in the world once fully developed. Miners deployed at our Corsicana Facility are already hashing, and we remain on track to increase our self-mining hash rate capacity to 31 EH/s by the end of the year, which will nearly triple our existing hash rate capacity.” (read more)

Following the report, H.C. Wainwright lowered the firm’s price target on Riot Platforms to $17 from $20 and kept a Buy rating on the shares. The firm said there was not a great deal of incremental information on the earnings call that wasn’t already discussed during Riot’s analyst day. (read more)

Additionally, Needham lowered the firm’s price target on Riot Platforms to $15 from $17 and kept a Buy rating on the shares. The company’s Engineering and Hosting revenue came in quite a bit lighter than the Street expected but its G&A expenses were also higher, the analyst said. The higher ‘Engineering’ cost was due to supply issues, which Riot management expects to be resolved by Q3, the firm added. (read more)

On Thursday, Coinbase (COIN) reported Q1 EPS of $4.40 on revenue of $1.6B, which compared to a loss per share of (34c) on revenue of $773M for the same period last year. “Our financial performance in Q1 reflects our focused execution on product expansion, ongoing operational discipline, and strong crypto market conditions,” the company said. “We generated $1.6B of total revenue and $1.2B of net income. Adjusted EBITDA was $1B – more than we generated in all of 2023. Additionally, we made meaningful progress against our 2024 priorities of driving revenue, utility, and regulatory clarity. Our market share in US spot and derivatives increased, we reached all-time highs on Coinbase Prime, and USDC market capitalization increased. Coinbase One adoption remains strong, and our international business was a larger contributor to our growth.” (read more)

Following the report, Goldman Sachs lowered the firm’s price target on Coinbase to $255 from $295 and kept a Neutral rating on the shares. The company’s Q1 results were strong, with the main driver of outperformance being a higher retail take rate, against market expectations for a decline, given prior inverse correlation of volumes and take rates, the analyst said. However, without a longer term trajectory to underwrite in the broader market, Goldman sees the stock’s risk/reward as largely a reflection of volatility in the crypto asset prices. (read more)

Meanwhile, Mizuho analyst Dan Dolev said that while Coinbase’s Q1 report was strong, this was widely expected given the rise of bitcoin and crypto volatility year-to-date. While take rates were resilient, the firm still expects the stock to trade down given that April’s $300M transaction revenue implies a Q2 run-rate that is 16% below Q1 levels. In addition, alt-coins plus staking, which are subject to potential regulatory scrutiny, now combine to account for 45% of Coinbase’s total revenue, up from 42% in Q4 and 32% a year ago, the analyst said. Mizuho kept an Underweight rating on the stock with a $145 price target. (read more)

Additionally, Canaccord raised the firm’s price target on Coinbase to $280 from $240 and kept a Buy rating on the shares. The firm said its Q1 underscores the company’s aggressive and yet thoughtful approach to garnering broader market share in good and less good crypto market environments. The firm also said they are encouraged by the launch and initial traction around the company’s layer 2 blockchain, called Base. (read more)

On Thursday, Stronghold Digital Mining (SDIG) reported Q1 EPS of 35c on a revenue of $27.52M, which compared to analyst estimates of a loss per share of (22c) on a revenue of $29.01M. Stronghold generated 546 bitcoin during Q1. Stronghold also announced initiation of a formal strategic review process with the assistance of outside financial and legal advisors. The company is considering a wide range of alternatives to maximize shareholder value, including, but not limited to, the sale of all or part of the company, or another strategic transaction involving some, or all of, the assets of the company. “Stronghold’s Board and management team are committed to maximizing value for our shareholders and, to that end, have commenced a comprehensive and thorough review of strategic alternatives,” said Greg Beard, CEO. “We have observed what we believe to be valuation dislocation when comparing Stronghold’s market value to valuations of public Bitcoin mining peers, merchant power companies, and data center and power generation assets trading in the market. We own over 130 megawatts of fully energized data center capacity with 4.1 exahash per second of installed hash rate capacity and potential to expand to beyond 7 EH/s through high-grading our fleet with current-generation bitcoin miners.” (read more)

BLOCK FACES COMPLIANCE PROBE: Federal prosecutors are examining financial transactions at Square and Cash App owner Block (SQ), NBC News’ Gretchen Morgenson reported Wednesday. Internal documents indicate Block processed crypto transactions for terrorist groups and Square processed transactions involving nations subject to economic sanctions, according to the report and two people with direct knowledge of the matter. Most of the transactions discussed with prosecutors, involving credit card transactions, dollar transfers and bitcoin, were not reported to the government as required, a former employee said, adding that Block did not correct company processes when it was alerted to the breaches. “From the ground up, everything in the compliance section was flawed,” the former employee told NBC News. “It is led by people who should not be in charge of a regulated compliance program.” (read more)

Following the news, Macquarie said anti-money laundering challenges in the fintech space are quite pervasive and in recent years have seen related fines surge. It sees more potential for fines and/or behavioral remedies for Block, like more robust oversight teams and infrastructure, as opposed to something structural like limitations on the types of business it can do. This would add some ongoing cost though, Macquarie pointed out. The firm kept an Outperform rating on Block shares with a $95 price target. (read more)

Meanwhile, Jefferies argued that the “article largely repeats claims featured in a Feb. article by the same author.” While stating that the firm is “not dismissive of the claims,” the “reaction seems overdone” given limited new info and the firm views the timing of the article in front of the company’s earnings report as “somewhat curious,” noting that the February article was also published within a week of Q4 earnings. The firm has a Buy rating and $100 price target on Block shares. (read more)

Additionally, Monness Crespi downgraded Block to Neutral from Buy and removed the firm’s prior price target, given that the uncertainty of an investigation lingering. The firm still sees upside to estimates but reports of prosecutors at SDNY digging into internal practices are “a wrench to sentiment that will likely remain a drag,” the analyst said. (read more)

On Thursday, Block reported Q1 earnings per share of 85c on revenue of $5.96B, which compared to analyst estimates of EPS of 72c on revenue of $5.82B. The company said, “Going forward, each month we will be investing 10% of our gross profit from bitcoin products into bitcoin purchases. We were one of the first public companies to put bitcoin on our balance sheet: we invested $220M into bitcoin, and that investment has grown by approximately 160% to $573M as of the end of the first quarter.” (read more)

Following the report, Baird raised the firm’s price target on Block to $100 from $98 and kept an Outperform rating on the shares. The firm said Q1 results were very good as yields on volume and MAU’s were very good across Square Seller and CashApp and margin progress again was outstanding. (read more)

MAWSON PLANS EXPANSION AT PA FACILITIES: Mawson Infrastructure Group (MIGI) announced Tuesday plans for expansion of the company’s Midland, Pennsylvania digital infrastructure and bitcoin digital mining facilities to 120 MW and is expected to increase total miner capacity at that operational site to about 38,810 miners. The company is planning to expand its Midland, Pennsylvania facility, which is located near Pittsburgh, given the growth in demand for its digital infrastructure business services, from both its existing co-location business services customers and from potential new enterprise customers. It also will provide Mawson with additional overall capacity and strategic adaptability across its three primary businesses – self-mining business, co-location services business and energy management. (read more)

IREN HASHRATE INCREASES TO 9 EH/S: On Monday, IREN (IREN) announced that its expansion is ahead of schedule and operating hashrate has increased to 9 EH/s. The company now expects to achieve 10 EH/s in May 2024. IREN’s fully funded expansion to 20 EH/s in 2024 remains on track, which will improve nameplate fleet efficiency to 21.9 J/TH. Furthermore, the company now expects to commission an additional 50MW of data center capacity as part of Childress Phase 3 this year. This increases planned data center capacity from 460MW to 510MW by the end of 2024. The additional 50MW of capacity has been enabled partly through a new substation design, as well as ongoing improvement and optimization of the company’s construction and procurement process. (read more)

BINANCE FOUNDER SENTENCED TO FOUR MONTHS: Changpeng Zhao, the founder and former CEO of cryptocurrency exchange Binance, was sentenced to four months in prison after pleading guilty to a money-laundering violation last year, the New York Times’ David Yaffe-Bellany reported Tuesday, citing court proceedings. Zhao acknowledged his company allowed terrorist groups and other criminals access to the platform and Judge Richard Jones said Zhao had taken responsibility for his offenses. “Your conduct does not warrant a 36-month sentence,” Jones said, calling Zhao “a dedicated family man and a giving person” and praising his “staggering accomplishment” in building Binance. (read more)

CRYPTO STOCK PLAYS: Publicly traded companies in the space include Bit Digital (BTBT), Coinbase, Core Scientific (CORZ), Greenidge Generation (GREE), Marathon Digital (MARA), MicroStrategy, Riot Platforms (RIOT), Stronghold Digital Mining and TeraWulf (WULF).

PRICE ACTION: As of time of writing, bitcoin dropped roughly 4% this week to $61,449 in U.S. dollars, according to CoinDesk.