Bitcoin climbs and drives crypto stocks higher

Crypto-currency stocks jumped on Monday, mainly due to bitcoin’s (BTC) modest rally that took the main token above $17,200. BTC has wallowed in the $16,000 range since early December and is now up 5% in 2023. As a result, shares of companies such as Coinbase and Marathon Digital have also soared on the back of Bitcoin’s rise.

For example, COIN was up about 15% yesterday, despite having suffered numerous downgrades and price target reductions to start the year. In addition, the leading U.S. crypto-currency exchange is currently up 25% from its record low earlier in 2023. At the time, analysts were concerned that contagion from FTX’s collapse late last year would hamper Coinbase’s performance deep into the new year. On Jan. 5, reports indicated that investment firm Cowen downgraded COIN from “Outperform” to “Market Perform” and reduced its price target from $75 to $36. Also, during this period, analysts George Kuhle and Stephen Glagola wrote:

“COIN’s activity is significantly correlated to crypto asset prices, trading volumes and volatility. COIN’s monthly trading volumes have seen a fairly consistent decline each subsequent month since November 2021, and visibility remains low for retail trading volumes to stabilize or rebound over 2023, given the macro backdrop and FTX contagion risks to crypto asset prices.”

Crypto-currency miner stocks ride the bitcoin bullish wave

Several crypto miners have also seen their shares jump significantly after Monday’s bitcoin price increase. For example, Marathon Digital was trading up a substantial 24% yesterday. Additionally, Riot Platforms, formerly known as Riot Blockchain, was up nearly 19%. In addition, Hut 8, Hive Blockchain, and Bit Digital were all trading above 20%. London-based miner Argo Blockchain was also up about 4.6% on Monday. This latest rise extends the company’s sustained rally since it accepted a $100 million bailout from Galaxy Digital in late December.

As part of the deal, Galaxy Digital would acquire Argos’ Helios facility for $65 million. In addition, Galaxy would provide a $35 million loan to cover the restructuring phase of Argos. In return, Argos would retain ownership of its machines at a facility in Texas and house Galaxy’s mining machines at the same facility for two years.

In essence, the deal saved Argos from certain bankruptcy while expanding Galaxy’s mining operations. Commenting on the deal at the time, Peter Wall, Argo’s chief executive, explained:

“Over the past several months, we have been looking for a way to continue mining in the face of a declining market, reduce our debt load and maintain access to the unique Texas power grid. This agreement with Galaxy accomplishes all of those goals, and allows us to live to fight another day.”

The contagion effect of crypto-currencies endures

Despite the horde of price increases in the stocks of the aforementioned crypto players, these gains represent a blip in the grand scheme. That’s because many of the aforementioned names have experienced massive withdrawals, up to 80%, over the past year.