Friday, 13 September 2024
by BD Banks
Shares of several crypto stocks rose this week after the release of important economic data, a presidential debate, and as the market clawed back losses from a difficult last week when the S&P 500 suffered its worst week of losses since March 2023.
Shares of Bitcoin miners Riot Platforms (NASDAQ: RIOT) and MARA Holdings (NASDAQ: MARA) traded roughly 10% and 17% this week, respectively, as of 11:30 a.m. ET Thursday. Meanwhile, shares of the Bitcoin holder and business intelligence company MicroStrategy (NASDAQ: MSTR) traded roughly 15% higher this week.
The price of Bitcoin, which all of these stocks have a correlation with, seemingly shook off bad economic and political news for the world’s largest cryptocurrency.
The Consumer Price Index came in line with expectations on Wednesday and the dollar rose this week, both events that Bitcoin and other crypto stocks do not always respond positively to. Additionally, Vice President Kamala Harris and former President Donald Trump had their widely anticipated debate this week. Following the debate, betting odds favoring a Harris victory in November rose.
The common belief is that a Harris presidency would be worse for Bitcoin than a Trump presidency because her administration would bring a harsher regulatory regime toward crypto. However, analysts at Standard Chartered put out a research note this week suggesting that Bitcoin can fare well regardless of who wins the election.
“A Harris victory would likely trigger an initial price decline,” Geoff Kendrick, Standard Chartered’s global head of digital assets research, wrote in a research note. “But we would expect dips to be bought as the market recognizes that progress on the regulatory front will still be forthcoming, and as other positive drivers take hold.”
Either way, Kendrick and his team foresee new highs for Bitcoin regardless of who is elected president — Bitcoin should hit $125,000 by the end of the year if Trump is elected and $75,000 if Harris wins.
In other more company-specific news, analysts at Barclays recently initiated coverage of MicroStrategy with an overweight rating. Barclays analyst Ramsey El-Assal said he likes the fact that MicroStrategy investors can gain exposure to Bitcoin as well as prudent capital deployment. Furthermore, El-Assal also sees potential with MicroStrategy’s software business, which he believes can achieve higher margins over time.
“In essence, MSTR feels like a BTC index fund that is also capable of generating its own investment capital, such that investors not only gain exposure to the underlying BTC asset price, but also benefit from future self-funded accumulation,” El-Assal wrote in a research note.
Much of the crypto industry seems to be rebounding this week along with the broader market. After all, the economy appears to still be on solid footing right now and the Federal Reserve is still widely expected to begin cutting interest rates next week, while the forward curve is predicting about 250 basis points of interest rate cuts between now and the end of 2025.
Lower interest rates tend to result in a weak U.S. dollar, an environment Bitcoin tends to perform well in because people view the token as an alternative to mainstream currencies. Given this scenario, I would expect Bitcoin to rise long-term, which should bode well for MicroStrategy, Riot, and MARA Holdings. That said, while these stocks trade in a correlated fashion to Bitcoin they are much more volatile and risky, which is why I prefer to hold Bitcoin over most other crypto-related stocks.
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Bram Berkowitz has a position in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Barclays Plc and Standard Chartered Plc. The Motley Fool has a disclosure policy.