Markets hit record highs; Is This Red-Hot Crypto Stock Next?

[ad_1]

Investors wasted no time on Monday, continuing to push the stock market higher, building on last week’s gains. The Nasdaq Composite (NASDAQINDEX: ^ IXIC) was the only index not to close at a record high, but it recorded the biggest gains, while the S&P 500 (SNPINDEX: ^ GSPC) and the Dow Jones Industrial Average ( DJINDICES: ^ DJI) managed to set new records even with more modest increases on Monday.

Index

Percent change

Point change

Dow Jones Industrial

+ 0.18%

+64

S&P 500

+ 0.47%

+22

Nasdaq Composite

+ 0.90%

+137

Data source: Yahoo! Finance.

Yet many investors are watching other parts of the market even more carefully. In particular, cryptocurrencies have been performing extremely well lately, with Bitcoin (CRYPTO: BTC) leading the way and climbing into record territory above $ 60,000. This is good news for a host of crypto stocks whose business models are built on a healthy cryptocurrency market, and the company that has seen the biggest positive impact recently is Coinbase Global (NASDAQ: COIN). As the crypto exchange giant is finally starting to see some more enthusiasm returning to the Bitcoin market, Coinbase has hit its best levels since right after its IPO, and many are hoping it can continue to sell. ‘build on its recent gains. Below, we’ll put Coinbase’s gains in context and see if it can maintain its momentum.

A rising tide lifts all ships

Interestingly, the latest wave of Coinbase arguably came from the announcement that a competing method of owning cryptocurrency was now available. Last week, a new exchange-traded fund gave investors a way to participate in the Bitcoin market. ProShares’ Bitcoin Strategy ETF (NYSEMKT: BITO) focuses on Bitcoin futures, choosing not to take direct custody of Bitcoin itself in favor of relying on derivative securities.

Yet Coinbase has worked hard to defend its business model and demonstrate its superiority. Last week, the company announced partnerships with Facebook (NASDAQ: FB) and the National Basketball Association, with the goal of increasing the visibility of crypto apps and supporting payments using digital currencies.

Image source: Getty Images.

Perhaps more importantly, Coinbase should benefit whenever Bitcoin and other crypto tokens are adopted more, as it offers ancillary services such as institutional custody. For example, on Monday, shares of Bakkt Holdings (NYSE: BKKT) more than tripled after Mastercard (NYSE: MA) announced it would work with the digital asset platform, as well as the technology specialist. Fiserv payment (NASDAQ: FISV) to make it easier to integrate payments based on fiat currency and on digital assets. Again, while Bakkt is arguably a direct competitor of Coinbase, investors seem happy enough with the progress the crypto industry has made to persuade traditional financial giants to move forward with the adoption of the crypto industry. cryptocurrency.

Will Coinbase reach its full potential?

Even with the gains of around $ 100 per share Coinbase has enjoyed since early October, the stock remains well below its all-time highs. The stock went public in April and quickly jumped to nearly $ 430 a share before falling back quickly. For a while, Coinbase traded below its initial benchmark price, reflecting some doubts about its core business activity.

In the short term, Coinbase will indeed have to demonstrate that its trading platform is viable and can generate sustainable commission income. Still, if the business can transition to other types of income, it could go a long way in demonstrating Coinbase’s first-come advantage in the space.

To be successful, Coinbase will need to keep innovating, which could mean the company will have to spend more on research and development to stay ahead. But in the long run, if the cryptocurrency market remains at the forefront of financial technology, then Coinbase has an opportunity to prove its leadership qualities – and that could bring it back to its IPO level in time.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

[ad_2]