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.

SEC APPROVES LISTING OF SPOT BITCOIN ETFS: SEC Chair Gary Gensler issued a Wednesday statement on the approval of spot bitcoin exchange-traded products: “Today, the Commission approved the listing and trading of a number of spot bitcoin exchange-traded product shares. I have often said that the Commission acts within the law and how the courts interpret the law. Beginning under Chair Jay Clayton in 2018 and through March 2023, the Commission disapproved more than 20 exchange rule filings for spot bitcoin ETPs. One of those filings, made by Grayscale, contemplated the conversion of the Grayscale Bitcoin Trust into an ETP. We are now faced with a new set of filings similar to those we have disapproved in the past. Circumstances, however, have changed. The U.S. Court of Appeals for the District of Columbia held that the Commission failed to adequately explain its reasoning in disapproving the listing and trading of Grayscale’s proposed ETP. The court therefore vacated the Grayscale Order and remanded the matter to the Commission. Based on these circumstances and those discussed more fully in the approval order, I feel the most sustainable path forward is to approve the listing and trading of these spot bitcoin ETP shares…Importantly, today’s Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities. Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws…Though we’re merit neutral, I’d note that the underlying assets in the metals ETPs have consumer and industrial uses, while in contrast bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin.” The SEC said it approved 11 applications, including from BlackRock (BLK), Ark Investments/21Shares, Fidelity, Invesco (IVZ) and VanEck. (read more)

In addition, Robinhood (HOOD) started offering the new class of spot Bitcoin ETFs, the company announced in a Thursday blog post. “These 11 ETFs became tradable to all customers in the United States this morning in both retirement and brokerage accounts though Robinhood Financial. Customers can elect to buy or sell Bitcoin ETFs just as they would any other ETF or stock. Customers can also still choose to purchase bitcoin directly through Robinhood Crypto, which offers the lowest cost to trade crypto on average,” Robinhood stated. (read more)

CLEANSPARK BUYS MORE BITCOIN MINERS: On Monday, CleanSpark (CLSK) announced the purchase of up to 160,000 Bitmain S21 miners, or the equivalent of 32 exahashes per second. Under the terms of the agreement, CleanSpark has purchased 60,000 units with delivery expected April through June 2024. The agreement also includes a strategic call option to purchase an additional 100,000 machines at a fixed price of $16.00 per terahash until the end of the calendar year. If the full call option is exercised, CleanSpark’s hashrate is expected to increase to approximately 50 EH/s, a 400% increase from its current hashrate of 10 EH/s, once all machines are deployed. (read more)

Following the news, H.C. Wainwright reiterated a Buy rating on CleanSpark with a $14 price target. The firm, which said this is one of the largest purchase agreements it has seen to date, feels the terms of the deal are favorable to CleanSpark. The company’s position as one of the largest and most efficient bitcoin miners is now further solidified, the analyst said. The firm reiterated CleanSpark as a top pick for 2024. (read more)

ANALYSTS SEE WINNERS AFTER ETF APPROVAL: Rosenblatt analyst Andrew Bond said Thursday that CME Group (CME) will benefit most among the exchanges from the SEC’s spot bitcoin exchange traded funds approval “as market makers look for a liquid market and singular pricing hub to hedge risk.” CME continues to grow its open interest leadership in bitcoin with over 30% market share, more than doubling from 13% at this time last year, the analyst said. The firm thinks the futures markets for bitcoin will become more concentrated as the asset class becomes more institutionalized. While not a driver of significant revenue growth yet for CME it’s likely to grow meaningfully over time, contended Rosenblatt. The firm’s view of the asset class remains the same. The supply of bitcoin is not going to increase, it is actually likely to shrink as large holders “HODL,” or hold on for dear life, wrote Rosenblatt. Meanwhile, demand is “about to increase exponentially,” it added. (read more)

On Thursday, JPMorgan noted the SEC approval was a much anticipated ruling that has added incremental buying pressure to bitcoin and bitcoin mining stocks over the past few months. That said, it is unclear whether the announcement will spur further near-term upside in bitcoin and mining stocks, or if investors will “sell the news,” the analyst said. The firm’s sense is that mining stocks are “due for a breather,” but it expects stock performance to track bitcoin prices over the coming weeks. JPMorgan remains bullish on bitcoin miners in 2024 and continues to think the “stars are aligning for a big year” in bitcoin mining. Scale miners are positioned to report record revenue and profits driven by strong hashrate growth and bitcoin appreciation, the analyst contended. Overweight-rated Iris Energy (IREN) is JPMorgan’s top value pick, but it is “incrementally constructive” on Neutral-rated Riot Platforms (RIOT), which it said is more actively traded and a long-term winner in the space. (read more)

AULT PLANS TO HOLD 5%-20% OF MINED BITCOIN: Ault Alliance (AULT) announced Wednesday that the company has decided that it will start holding up to 20% and minimum of 5% of the bitcoin it mines on the company’s balance sheet. This strategic move is part of the company’s broader plan to adjust its asset management approach to ultimately create a more valuable enterprise and drive stockholder value. Ault Alliance, through its wholly owned subsidiary, Sentinum, has made significant strides in bitcoin mining, with December marking the highest single monthly run rate for bitcoin miners in the company’s history, as Sentinum mined approximately 151 bitcoin during the month. This monthly run rate amounted to about $6.9M, setting an annual run rate for current bitcoin mining operations at approximately $83.3M, based on a bitcoin price of around $46,000. (read more)

ANALYST SAYS ETF APPROVAL NOT GOOD NEWS FOR COINBASE: Mizuho said Thursday that SEC approval of the spot bitcoin ETFs is not good news for Coinbase (COIN). Potential upside to the company’s revenue from bitcoin ETFs may be more muted than thought, with just 1%-2% benefit from custody fees and 5%-10% total benefit if the ETFs drive additional spot bitcoin trading, the analyst said. Plus, deeper cannibalization of high-margin spot bitcoin trading and/or share loss to brokers offering ETFs could offset future benefits, said the firm. It expects Coinbase’s fundamentals “to serve as a painful reality check in coming quarters” and reiterated an Underperform rating on the name with a $54 price target. (read more)

Additionally on Friday, BofA raised the firm’s price target on Coinbase to $79 from $66 and kept an Underperform rating on the shares. After reaching “multi-year lows” in Q3, data points to a Coinbase transaction volume beat in Q4, the analyst said. However, BofA continues to see risk in shares given crypto market unpredictability, a lack of revenue diversification, and lingering regulatory and legal issues and maintained its Underperform rating. (read more)

Meanwhile on Monday, Needham raised the firm’s price target on Coinbase to $180 from $160 and kept a Buy rating on the shares. The firm also named the stock its Top Pick for 2024 and added it to its Conviction List. Needham is impressed with the product growth at Coinbase, including the company’s derivatives launch, international expansion, and the Base chain launch, the analyst said. The firm further sees Coinbase as better positioned in 2024 than during the last crypto bull cycle in 2021 and believes that it can maintain an elevated retail trading take rate at or above 170bps while gaining trading market share. (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 (MSTR), Riot Platforms, Stronghold Digital Mining (SDIG) and TeraWulf (WULF).

PRICE ACTION: As of time of writing, bitcoin rose roughly 3% this week to $45,451 in U.S. dollars, according to CoinDesk.