Opinion: Bitcoin ETFs Will Hit These Three Crypto Stocks Hard

A Bitcoin victory could ultimately be detrimental to crypto stocks like Coinbase, Marathon Digital, and MicroStrategy.

Written by Tom Carreras, DL News

Compiled by: Luccy, BlockBeats

Editor’s note: The launch of the Bitcoin ETF marked a new milestone in cryptocurrency investment, with Bitcoin rising 6% that day and breaking through the $49,000 mark. But analysts at Maple Finance and North Rock Digital pointed out that this victory may have an adverse impact on some cryptocurrency-related stocks, such as Coinbase, Marathon Digital and MicroStrategy.

Analysts believe that with the launch of Bitcoin spot ETFs, traditional investors may be more inclined to invest directly in Bitcoin rather than using these stocks. For these companies, they face their own unique challenges, and the cryptocurrency market will enter a new era of competition. BlockBeats compiles the original text as follows:

This morning, a spot Bitcoin ETF launched in the United States — a historic moment that makes it easier than ever for investors to gain exposure to the top cryptocurrency.

But analysts at Maple Finance and North Rock Digital said a Bitcoin victory could ultimately be detrimental to crypto stocks like Coinbase, Marathon Digital and MicroStrategy.

Here’s the crux of the matter: These stocks have historically tended to serve as alternatives to traditional investors seeking Bitcoin exposure without using Bitcoin futures ETFs.

Analysts said that now that Bitcoin spot ETFs are available in the United States, these investors may “move from these less ideal instruments to the spot Bitcoin exposure they originally wanted.”

Bitcoin rose 6% today, crossing the $49,000 mark before falling back to $46,000. MicroStrategy fell 4%, Coinbase fell 5% and Marathon fell 14%.

Every company is dealing with its own unique challenges.

Inner resistance

“There’s no doubt that Coinbase is a good business, but ETFs bring a lot of new competition to the playing field,” Quinn Thompson, head of capital markets and growth at Maple Finance, told DL News.

The SEC’s recognition of ETFs has laid the foundation for a price war among different fund managers. Cathie Wood’s Ark Invest will charge zero fees for the first year, while BlackRock charges 0.12% for the same period, rising to 0.25% after that.

Coinbase told DL News that although analysts have questioned the exchange’s high retail trading fees, it is not worried about competition.

According to data from CoinGecko, Coinbase has traded more than $2.2 billion worth of Bitcoin in the past 24 hours, a figure that is in line with expected inflows into the ETF.

“Some estimates call for $2 billion to $4 billion in inflows within the first few days of trading in new Bitcoin ETFs,” Thompson said. “This is a serious infringement of what was previously a large moat in the United States.”

At the same time, Bitcoin mining companies like Marathon must deal with the upcoming halving, which will see the Bitcoin network cut Bitcoin mining rewards in half. Halvings occur every four years, with the next one currently expected in April.

As Bitcoin’s block rewards are halved, miners’ incomes will plummet, while their huge energy costs will remain the same or even continue to climb.

“The halving poses a serious risk to profitability that can only be addressed by increasing prices (over $75,000 by my estimate) or increasing trading activity and fees (at least two or three times current levels),” Thompson said.

“Producers with higher costs may face some difficulties in the months after the halving,” he added.

While Marathon is one of the largest Bitcoin mining companies in the world, its electricity costs are among the highest in the industry, according to an October report from JPMorgan Chase.

“This will force miners to issue more equity to expand their runway and dilute existing shareholders. This is a tried and true strategy they continue to use, so don’t be that surprised,” Thompson said.

“Both gold ETFs and gold miners exist on the public market, and people invest in them for different reasons. If they can coexist, why can’t Bitcoin ETFs and Bitcoin miners coexist?” Charlie Schumacher, vice president of corporate communications at Marathon, told DL News.

Schumacher added: “Overall, we think this event is very positive for the industry, as it will likely attract more people into the field, resulting in a bigger pie for everyone.”

In the case of MicroStrategy, the report says, its shares are currently trading at a significant premium to the underlying book value of the business, which is the value of the operating company and the value of its 189,150 Bitcoin holdings.

However, analysts say the uncertainty surrounding MicroStrategy’s possible sell-off of its Bitcoin holdings, coupled with co-founder Michael Saylor’s recent sale of company stock and the risk of additional downward pressure, make the investment more attractive than simply investing in Bitcoin. ETFs are riskier to acquire.

The report compared MicroStrategy to Grayscale’s Bitcoin Trust, which also traded at a premium for years, “but reversed course and traded at a discount when the asset fell out of favor due to better alternatives and souring sentiment.” .”

Coinbase and MicroStrategy did not immediately respond to requests for comment.