MicroStrategy, Coinbase & Blackrock: 3 Stocks Riding on Bitcoin’s Surge

Bitcoin (BTCUSD) has gained around 40% since the US presidential election on 5 November, breaking a new crypto milestone by hitting a new all-time high near $100,000 over the weekend on the 23 and 24 November. While Bitcoin’s price has been retreating from its post-election rally below $100,000 on Tuesday, 26 November, the crypto market seems to be affecting other sectors, such as some stocks.

Some traders wonder if it is too late to buy and trade Bitcoin, while others might be diversifying their trading portfolio with shares of companies that can potentially benefit from their Bitcoin exposure and the recent rise in the biggest and probably most traded cryptocurrencies.

Let’s take a closer look at MicroStrategy (MSTR), Coinbase (COIN) and BlackRock (BLK)—3 companies that seemed to have gained from the recent Bitcoin rise:

MicroStrategy Soars 540% in 2024: Will the Rally Continue?

MicroStrategy, a business intelligence software firm turned Bitcoin investment juggernaut, has seen its shares skyrocket by 540% this year and 77% since the US election as of 25 November 2024. This gives the company a $91 billion market valuation, more than double the worth of its underlying Bitcoin holdings, estimated at $38 billion (as of 25 November). 

This rise is mostly attributed to trader optimism towards the digital assets industry, particularly under Trump’s incoming administration, and MicroStrategy’s embrace of Bitcoin as its core strategy.

The company’s founder and executive chairman, Michael Saylor, has capitalised on this enthusiasm. Since pivoting MicroStrategy into a "Bitcoin buying machine" in 2020, Saylor has repeatedly acquired Bitcoin, leveraging the firm’s balance sheet and raising billions in debt to expand its cryptocurrency holdings. 

For some retail investors, MicroStrategy has become a proxy for Bitcoin itself, offering a stock-market-friendly alternative to direct cryptocurrency ownership. However, as spectacular as MicroStrategy’s ascent has been in 2024, questions loom about its rally sustainability. 

However, the company’s reliance on Bitcoin is a double-edged sword, as it ties its fortunes to the extreme volatility of the cryptocurrency market. This is because Bitcoin’s history is littered with boom-and-bust cycles, and MicroStrategy’s heavy use of leverage makes it especially vulnerable during downturns and market crashes. 

For instance, the 2022 crypto-market meltdown (also known as the crypto winter), triggered by the collapse of FTX and the broader industry turmoil, saw Bitcoin plummet below $16,000. This sent shockwaves through MicroStrategy’s financials, leading to billions in losses and ultimately prompting Saylor to step down as CEO, a position he started in 1989.

Some might argue that MicroStrategy’s current rally could be a bubble driven by speculative frenzy rather than sustainable growth. Moreover, the company still carries significant debt—$4.3 billion in convertible notes as of 29 October. Additionally, Saylor has ambitious plans to raise an additional $42 billion through stock and bond offerings to buy even more Bitcoin. While this strategy may amplify returns during bull markets, it could exacerbate losses during downturns, exposing the company to potentially heightened financial risk.

For now, it seems that MicroStrategy’s surge exemplifies the high-risk and high-reward nature of tying a company’s fate to cryptocurrency. While some traders might remain confident in Saylor’s vision and Bitcoin’s long-term potential, others might rather caution that the same volatility fueling the stock’s price rise could just as easily lead to a fall. (Source: The Wall Street Journal)

Only time will determine the future trajectory of both Bitcoin and MicroStrategy.

Is Coinbase Riding on Bitcoin’s Surge?

Shares of Coinbase, the largest registered cryptocurrency exchange in the U.S., have soared 70.9% quarter-to-date, giving the company a market capitalisation of $76.3 billion.

As Coinbase can serve as a financial infrastructure and technology provider for the crypto economy, it can benefit from increased volatility and rising prices across the crypto market, which drives trading volumes and platform activity. Additionally, growing regulatory clarity has acted as a tailwind for Coinbase and the broader crypto sector, instilling greater investor confidence. Coinbase has also strengthened its banking connections, acquired new licenses, and expanded its product offerings to cater to the diverse needs of its customers.

Although Bitcoin’s surge has likely been a significant catalyst for Coinbase’s recent stock performance, the broader momentum in the cryptocurrency market seems to have played an equally important role. Major altcoins such as Ethereum (ETHUSD), Solana (SOLUSD), Binance Coin (BNBUSD), Ripple, and Dogecoin have seen gains of approximately 50%, 134%, 105%, 132%, and an astonishing 350%, respectively, since January as of 26 November. This widespread rally across multiple cryptocurrencies could have boosted overall trading activity on Coinbase’s platform, further supporting its growth.

The potential growing interest in cryptocurrencies and expanding market participation suggest that Coinbase could continue to benefit from this trend. Analysts at Oppenheimer have set a bullish price target of $358 for Coinbase shares, significantly higher than the Wall Street consensus of $273.

Can BlackRock Continue to Benefit from the Growing Interest in Bitcoin ETFs?

The introduction of Bitcoin exchange-traded funds (ETFs) has opened the door for mainstream traders to gain exposure to cryptocurrency in a regulated and accessible way, and BlackRock has been at the forefront of this shift. 

In November 2024, the world’s largest digital asset manager launched options on its iShares Bitcoin Trust ETF (IBIT), its first spot Bitcoin ETF. This launch is seen as a pivotal moment for the crypto market, helping to enhance liquidity, reduce volatility, and attract institutional traders. With other players, such as CBOE Global Markets, preparing to list Bitcoin ETF options in December, the momentum behind this financial innovation is likely to continue to grow.

BlackRock's IBIT surpassed expectations in its debut. On its first trading day, options on the IBIT ETF saw 353,716 contracts traded, making it one of the most active ETF options debuts in history, rivalling even META’s  2012 options launch. The strong trading volumes reflect growing institutional and retail interest in Bitcoin as an asset class. BlackRock now holds $48.4 billion in Bitcoin through IBIT, surpassing the $34 billion held in its iShares Gold (XAU) Trust, a significant step that could position Bitcoin alongside gold as a safe-haven asset.

The success of Bitcoin ETFs and the ability of the company to potentially gain from the growing demand for cryptocurrency exposure could have supported BlackRock’s stock in 2024. Over the past 52 weeks, BlackRock shares have risen by 42.5%, outpacing the S&P 500 31% gain as of 25 November. Year-to-date, BlackRock is up 27.7%, again outperforming the broader market. However, traders should remember that there are various factors affecting a stock price and that BlackRock’s stock performance cannot be attributed solely to its Bitcoin ETF offerings.

Conclusion

As Bitcoin recently hit the $100K mark, a key milestone for the crypto market, its impact seems to extend to stocks like MicroStrategy, Coinbase, and BlackRock. However, the inherent volatility of the crypto market underscores that the path forward is far from predictable. Therefore, traders should always follow significant news and events that can impact Bitcoin and the crypto market.