The logo of Coinbase Global Inc, the largest cryptocurrency exchange in the United States, is displayed on the Nasdaq MarketSite jumbotron and others in Times Square in New York, US, on April 14, 2021.
Shannon Stapleton | Reuters
Coinbase shares soared on Thursday after the crypto exchange announced a partnership with BlackRock that will allow its institutional customers to buy bitcoins.
Coinbase shares rose 9%. Earlier in the day they jumped as much as 40%.
The services of the company’s Prime offering will be available to customers of BlackRock’s portfolio management platform for institutional investors, Aladdin, the company said on its blog. Coinbase will offer cryptocurrency trading, custody, prime brokerage and reporting capabilities. BlackRock is the world’s largest asset manager with more than $8 trillion under management.
The COIN ticker also became one of the most mentioned names in Reddit’s WallStreetBets chat room on Thursday, surpassing GameStop’s popularity on the online forum, according to alternative data provider Quiver Quantitative.
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focusing on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, Global Head of Strategic Partnerships of BlackRock ecosystems, in a statement. The partnership will allow them to “manage their bitcoin exposures directly into their existing trading and portfolio management workflows.”
This interest is a beacon in the night for the crypto community. The industry has seen a slew of hacks and breaches, including attacks on Solana and Nomad just this week. Crypto is also lower with the broader sell-off in risk assets and is further hurt by the financial contagion that stemmed from the collapse of Terra in the spring. Many investors argue that institutional adoption is key to increasing the maturity, stability and price of bitcoin and perhaps the broader crypto market.
Coinbase shares have been on a tear lately, and analysts aren’t sure why. Shares rose 20% on Wednesday. Shares were still down nearly 70% for 2022 through Wednesday’s close.
Coinbase’s unusual jump this week could be related to investors betting against the stock struggling to cover their short positions, a so-called short squeeze. According to FactSet, more than 22% of Coinbase shares that are available for trading are sold short. So as the stock has performed, those investors have to buy back the stock to cover their losses, further fueling the gains.
Despite the market doom and decline in Coinbase’s share price, Citi on Thursday called it “the sell-out before the donkey” and said it is on the lookout for a reversal of the stock over the next three months.
“Some good developments are brewing,” analyst Peter Christiansen said in a note to investors, citing possible regulation of stablecoins and Ethereum’s long-awaited transition to proof-of-stake.
– CNBC’s Yun Li contributed reporting.