This week, investors celebrated a significant decision on one token as a victory for the sector, sending shares of firms exposed to cryptocurrencies higher.
Despite ending 1.6% down on Friday, Coinbase Global, Inc. gained 34% this week, its greatest performance for the period since mid-March.
Other equities with a crypto connection also performed well during the last week. This week saw the strongest performance for Robinhood Markets, Inc. in almost a year, while Bakkt Holdings, Inc. gained 30%. Even if some of them dropped off on Friday, bitcoin mining firms including Marathon Digital Holdings, Hut 8 Mining Corp., Riot Platforms, Inc., and Cipher Mining Inc. all witnessed weekly increases.
The major factor in the increases was the decision on Thursday that the Ripple Labs Inc. cryptocurrency is a security when sold to institutional investors but not to the general public. The choice boosted investor confidence and Bitcoin earlier in the week as it contributed to excitement around Bitcoin ETF applications.
« This is a positive read-through to COIN as it sets precedent that crypto token sales through exchanges, at least in the XRP case, did not violate securities laws, » Needham analyst John Todaro said in a note, increasing his price objective on the buy-rated company to $120 from $70. We think that this result should slightly lessen the regulatory pressure on the stock.
As Benjamin Salisbury of Height Capital Markets noted in a note, the decision was obviously special to Ripple and shouldn’t be hastily generalized to the whole sector.
Salisbury stated,
“We note that the ruling is specific to facts in this case alone and caution against applying this ruling to the Coinbase lawsuit broadly. We also expect the SEC to appeal the ruling, given the potential implications for securities laws.”
Without regard to laws, short covering may also be boosting equities related to cryptocurrencies, whose 2023 rallies have positioned contrarian traders to be under pressure.
According to statistics from S3 Partners LLC, short sellers purchased back $407 million worth of Coinbase shares to close out their holdings in the most recent month.
According to S3, Coinbase shorts are the seventh least lucrative shorts this year, trailing only Tesla Inc., Nvidia Corp., Apple Inc., Microsoft Corp., Meta Platforms Inc., and Amazon.com Inc. in paper losses of $2.9 billion.
