David Canellis

This is Cheatsheet, a primer on what’s happening in crypto today.



Bitcoin is again the best performing crypto mega-cap over the past day and now threatens to break $60,000 for the first time since its all-time high in November 2021.



<a href="https://blockworks.co/price/xrp">XRP</a> trailed very slightly second-best with 4.1% gains to bitcoin’s 4.1%, as of 7 am ET. Ether (<a href="https://blockworks.co/price/eth">ETH</a>) had stayed flat.



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) is again giving cover for memecoins to do their thing: <a href="https://blockworks.co/price/pepe">PEPE</a> trumped practically everything at the top end of the crypto market over the past 24 hours after pumping 45%.



Blockchain-powered storage protocol arweave (<a href="https://blockworks.co/price/ar">AR</a>) followed with 40%. Upstart layer-1 Aptos (<a href="https://blockworks.co/price/apt">APT</a>) is third with 18%, then memecoins <a href="https://blockworks.co/price/ordi">ORDI</a> and <a href="https://blockworks.co/price/bonk">BONK</a>, which added 16% and 14%.



<h2 class="wp-block-heading">What’s happening on-chain</h2>



DeFi is blowing up alongside bitcoin and ether: There’s now nearly $90 billion in crypto locked across thousands of apps, up 10% since yesterday and by more than half from the start of the year.



<ul>
<li>It’s the highest total value locked (TVL) since May 2022, one of two peaks from the 2021 bull market (which began with 2020’s “DeFi summer”).</li>



<li>More than 61% is on Ethereum, the most since Halloween 2021, when crypto was near all-time highs.</li>



<li>Tron and Binance Smart Chain are still second and third with 11.11% and 5.36% TVL dominance right now, per DeFiLlama.</li>
</ul>



Solana’s DeFi space has been energetic, pushing its share of TVL from under 1% in November to more than 2.5%. Liquid staking platform Lido otherwise makes up over one-third of all TVL across all blockchains, per DeFiLlama.



That means Lido’s flagship Ethereum staking token, lido staked ETH (<a href="https://blockworks.co/price/steth">stETH</a>), is technically the sixth largest cryptocurrency by market cap, ahead of XRP and behind solana (<a href="https://blockworks.co/price/sol">SOL</a>).



Lending and debt apps Maker and Aave on Ethereum and JustLend on Tron are also big draws. But in under a year, re-staking app EigenLayer has quickly rivaled them all, now with $9.2 billion TVL to Maker’s $9.3 billion.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1722" height="486" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=1024&amp;h=1024" alt="" class="wp-image-81201" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=1722 1722w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/02/ethtvl.png?w=80 80w" sizes="(max-width: 1722px) 100vw, 1722px" /><figcaption class="wp-element-caption">Price appreciation makes up a lot of the added TVL but the number of ETH in DeFi is also going up (source: <a href="https://defillama.com/chain/Ethereum?currency=ETH&amp;volume=false">DeFiLlama</a>)</figcaption></figure>



Read more: <a href="https://blockworks.co/news/eigenlayer-tvl-soars-without-deposit-cap">EigenLayer TVL soars after deposit cap removed</a>



<ul>
<li>DEX derivatives hit their second-highest volumes on record with $11.66 billion, up 22% from the previous day ($15.16 billion in Feb. 2022 is still the highest).</li>



<li>Ethereum users paid $18.5 million in fees to use the chain yesterday — the second-biggest daily spend in almost nine months.</li>



<li>The NFT market is percolating: $55.3 million was traded yesterday, up 44% from the daily average at the start of the month (CryptoPunks, Bored Apes and Pudgy Penguins were the hottest, according to <a href="https://www.cryptoslam.io/">CryptoSlam</a>).</li>
</ul>



<h2 class="wp-block-heading">Crypto business</h2>



Bitcoin’s current rampage is still converting to serious gains for major crypto stocks.



<ul>
<li>Core Scientific, the miner fresh from bankruptcy, saw the most with 10.5% before the bell and another 4.61% after hours.</li>



<li>MicroStrategy rallied about the same across both sessions, leading Coinbase, which made nearly 9% altogether.</li>



<li>Mining rig maker Canaan performed the worst during the day session, slipping 11.2% before reclaiming most of it after hours, as bitcoin postured to hit $59,000.</li>
</ul>



Coinbase is set to open today’s session at $211.30, which would be its highest share price since March 2022.&nbsp;



At around $50 billion market value, Coinbase is the largest publicly-traded crypto company by far — now eclipsing Jack Dorsey’s fintech company Block (formerly Square), which has long incorporated bitcoin in its Cash App.



Coinbase has even now flipped vehicle manufacturers Ford and General Motors after adding more than a quarter to its share price over the year to date (for scale, the AI-adjacent Nvidia is up 63%).



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/16960852/embed#?secret=LwwQxLJNn7" data-secret="LwwQxLJNn7" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Don’t call it a comeback (it so is)</figcaption></figure>



Read more: <a href="https://blockworks.co/news/coinbase-stake-sale-brian-armstrong">Coinbase CEO fulfills pledge to sell 2% stake — now he could sell another 5%</a>



<ul>
<li>Protocol treasuries are booming due to rising token prices, now at an all-time high of $40 billion, up $2.5 billion over the past week, per <a href="https://deepdao.io/organizations">DeepDAO</a>.</li>



<li>Ethereum layer-2s Optimism and Arbitrum boast the biggest with nearly $8 billion a pop, although their own governance tokens make up most of those funds.</li>



<li>The Ethereum Foundation (a non-profit, not a DAO) has the most out of <a href="https://defillama.com/treasuries">treasuries</a> with only bitcoin and/or ether, worth over $1 billion after gaining $300 million this month due to rising ether prices.</li>
</ul>



<h2 class="wp-block-heading">On the ground</h2>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Ethereum reached $100B in economic security WW3 resistance is the goal—next step is $1T&mdash; Justin Ðrake 🦇🔊 (@drakefjustin) <a href="https://twitter.com/drakefjustin/status/1762423600999469104?ref_src=twsrc%5Etfw">February 27, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">$100 billion worth of American dollars at stake</figcaption></figure>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">SBF bidding from prison <a href="https://t.co/WLsgdAK0Bv">pic.twitter.com/WLsgdAK0Bv</a>&mdash; Ansem 🐂🀄️ (@blknoiz06) <a href="https://twitter.com/blknoiz06/status/1762722211826131036?ref_src=twsrc%5Etfw">February 28, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">Live free or shill from prison</figcaption></figure>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Last cycle we almost bought the constitution, this cycle we take it. <a href="https://t.co/PqMIGFpe2E">pic.twitter.com/PqMIGFpe2E</a>&mdash; Thomas Bahamas (@thomasbahamasfi) <a href="https://twitter.com/thomasbahamasfi/status/1762684154897183067?ref_src=twsrc%5Etfw">February 28, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">Revenge is a dish best served in a bull market</figcaption></figure>



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Cheatsheet: Coinbase flips Ford, General Electric as bitcoin pumps

Casey Wagner

Cryptocurrency-related equities slipped Wednesday after the open as bitcoin and ether struggled to maintain recent momentum and investors whipsawed between risk-on and risk-off strategies ahead of the Federal Reserve Open Market Committee minutes release.&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) were down around 2.5% and 4%, respectively, at time of publication. Coinbase shares tumbled 5% while mining operations Marathon Digital and Riot Platforms dipped 5.4% and 3%, respectively.&nbsp;



The S&amp;P 500 and Nasdaq Composite Indexes also edged lower, losing around 0.3% and 0.7%, respectively. Earnings season is coming to a close — 79% of S&amp;P 500 companies have already reported — and investors are parsing through what analysts say have been largely unremarkable reports.&nbsp;



Read more: <a href="https://blockworks.co/news/coinbase-earnings-q4-analysis">Coinbase reported Q4 earnings Thursday. Here’s what stood out.</a>



“Q4 earnings season is hewing closely to long-run averages in terms of top and bottom line beat percentages, even if it is disappointing when measured against the more recent past,” said Nicholas Colas, co-founder of DataTrek Research. “It is, in other words, entirely normal. All this fits with our ‘mid cycle playbook,’ where there is little to surprise markets regarding corporate earnings power.”



<a href="https://blockworks.co/tag/fomc">FOMC</a> minutes released Wednesday should provide some clarity for investors about what data central bankers need to see before they start cutting interest rates, analysts said. CME futures-priced probability of a May cut was hovering around 33% ahead of the release. 



“As revision-prone as the Jobs Data has been over the last year, plenty of other indicators (Initial Claims, Atlanta Fed Wage Growth Tracker, Office Occupancy, Google Trends) point to a still-healthy labor market,” Colas said. “As long as that is the case, the risk remains that <a href="https://blockworks.co/tag/inflation">inflation</a> is not well and truly vanquished.”&nbsp;



The selloff in Coinbase (<a href="https://blockworks.co/price/coin">COIN</a>) comes after a <a href="https://blockworks.co/news/coinbase-earnings-q4-2024">largely positive earnings report</a> from the crypto exchange earlier this month that saw shares rally almost 30% in a three-day period.&nbsp;



<a href="https://blockworks.co/tag/coinbase">Coinbase</a> reported a 41% revenue increase from last quarter to $954 million during the final months of 2023.&nbsp;



Investors cashed in on Coinbase profits, with <a href="https://blockworks.co/news/ark-invest-sells-coinbase-shares">three of Cathie Wood’s ARK ETFs</a> selling a total of more than 875,000 Coinbase shares earlier this month.&nbsp;



<a href="https://blockworks.co/tag/marathon-digital">Marathon Digital</a> is slated to report earnings Feb. 28.&nbsp;



Investors should keep an eye out for machine upgrades ahead of <a href="https://blockworks.co/news/bitcoin-halving-expected-on-4-20">bitcoin’s next halving, expected in April</a>. 



“What’s more, the number of new BTC entering the market every day is set to drop by 50% in late April, when the four-year <a href="https://blockworks.co/tag/bitcoin-halving">halving</a> reduces the rewards paid by the algorithm to miners,” said Noelle Acheson, author of the Crypto is Macro Now newsletter. “Previous halvings have been a bullish catalyst for BTC, as selling pressure from new supply is lessened — and this was even without the boost to demand from US listed spot <a href="https://blockworks.co/tag/etfs">ETFs</a> and possibly soon similar products listed in Hong Kong.”



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Bitcoin loses 2% as investors cash in on Coinbase profits

Sebastian Sinclair

When digital asset valuations surge, crypto mining stocks naturally benefit, much like other commodity producers.



Data shows that major firms including Marathon Digital (MARA), Bitfarms (BITF) and Riot Platforms (RIOT) are posting double-digit gains over the past five days, between 17% and 19%.



Speculation for crypto mining stocks has been fueled by the crypto market rally at the beginning of the week, which saw the price of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) cement a new yearly high above $35,000.



Miners faced significant challenges last year attributable to rising electricity costs, the Ukraine-Russia conflict and falling crypto prices — sending respective share prices tumbling.



In the face of those challenges and by the beginning of this year, miners managed to recover substantial losses in their valuations by August — clawing back some 150% to 200% in year-to-date terms.



As a result, over the past 12 months, MARA has exceeded its earnings per share (EPS) estimate in 25% of instances, whereas the broader crypto mining industry has outperformed the EPS estimate 61.8% of the time during the same timeframe, <a href="https://www.tipranks.com/stocks/mara/forecast">TipRanks</a> data shows.



BITF and RIOT have also managed to beat similar EPS estimates leading to a rush of new investments in the wake of the crypto industry’s rising valuations.



<h2 class="wp-block-heading">Operating headwinds</h2>



It comes as the spot prices for existing bitcoin ASICs continue to set all-time lows, bitcoin mining consulting firm BlocksBridge noted in its weekly miner note.



Cheaper mining equipment is helping to drive down some operational costs in the face of bitcoin’s increasing hashrate — a sign of heightened competition amongst miners, Blockworks was previously told.



While miner profitability took a hit <a href="https://blockworks.co/news/bitcoins-hashrate-miner-profitability">last month</a> due to fresh local highs in those hash rate figures, it appears the sector is retaining resiliency.



Various previous-generation models, which offer a hash rate between 25 and 38 J/TH — including the Antminer S19, Avalon 1326, and WhatsMiner M30S+ — are now priced below $10 per TH/s, BlocksBridge said.



Still, it remains to be seen whether miners can sustain their good fortunes in tandem with rising operational costs.



According to <a href="https://www.bls.gov/news.release/cpi.nr0.htm">data</a> from the US Bureau of Labor Statistics, electricity prices rose 1.1% from the month of August through to September, putting further strain on households and businesses.



However, on Monday, US-regulated digital asset services firm BitOoda noted in its weekly report Coal plants need to secure fuel a year in advance and are now accumulating more coal than they can manage.&nbsp;



Current coal stock levels are high compared to recent years, despite a 29 gigawatt reduction in coal capacity since 2020. This could put downward pressure on power prices in the US if plants have to operate uneconomically to deplete excess coal, BitOoda said.



“A mild winter would likely result in lower prices with coal stocks at those high levels,” the digital asset services firm said.



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Bitcoin rally powers mining stocks higher

Crypto stocks have been on a tear this year, outstripping most major cryptocurrencies.



Major bitcoin miner Core Scientific (CORZ) has clocked 1,140% gains to reach $0.87 per share.&nbsp;



The Texas-headquartered firm, which <a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> last December, hopes to <a href="https://blockworks.co/news/core-scientific-bankruptcy-exit" target="_blank" rel="noreferrer noopener">make a comeback</a>. But it has a ways to go to fully repair its once-billion-dollar valuation — still down 56% over the past year and more than 90% since it went public in 2021.



Cipher Mining (CFIR) has also been buoyed by <a href="https://blockworks.co/news/bitcoin-price-rally-on-chain-metrics" target="_blank" rel="noreferrer noopener">bitcoin’s year-to-date rally</a>, having jumped almost 600%. <a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a> is up 80% in 2023, even after slipping below $30,000 this week.



TeraWulf (WULF) — which debuted the US’s <a href="https://blockworks.co/news/bitcoin-mining-nuclear-energy" target="_blank" rel="noreferrer noopener">first nuclear-powered bitcoin mining facility</a> in May — and Iris Energy (IREN) are respectively up 384% and 466%.&nbsp;



Excluding Core Scientific, a trader who placed equal bets across top bitcoin mining stocks at the start of the year would be up nearly 250%.



Investments into the top 50 cryptocurrencies by market cap, meanwhile, would have netted the same individual an average of around 49% over the same period.&nbsp;



Ether (<a href="https://blockworks.co/price/eth">ETH</a>) is up 58% and <a href="https://blockworks.co/price/xrp">XRP</a> has popped 130%, with markets for the latter reacting positively to a mixed court ruling in a <a href="https://blockworks.co/news/xrp-2023-highest-daily-close">long-running legal dispute</a>.



Coinbase (COIN), the only publicly-listed US crypto exchange, has also tripled this year, having started below $35 to $101 today. That converts to one-third gained over the past year, but it’s still 70% down since its April 2021 direct listing.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14508314/embed#?secret=MZFMjfEawO" data-secret="MZFMjfEawO" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Bitcoin mining stocks are proving more volatile than bitcoin (chart by David Canellis)</figcaption></figure>



The world’s largest asset manager, BlackRock, named Coinbase as the potential <a href="https://blockworks.co/news/blackrock-clout-bitcoin-etf-approval">bitcoin custodian</a> in its spot ETF filing last month.



An average of 22 Wall Street analyst forecasts on Coinbase points to a price target of $68.53, suggesting a 32% fall from its current price, per <a href="https://www.tipranks.com/stocks/coin/forecast">TipRanks</a>.



Performance in the fintech payments sector, meanwhile, has been mixed. Block (formerly Square), the firm behind bitcoin-forward Cash App, has seen an 18% increase year to date.



PayPal, which allowed users to buy and sell crypto back in October 2020, is down about 2%.



While the corporate earnings season has kicked off across the broader economy in the US, publicly-traded crypto companies are not due to report until later this month.&nbsp;



Positive earnings for crypto stocks this month <a href="https://blockworks.co/news/crypto-prices-q2-earnings" target="_blank" rel="noreferrer noopener">may act as a catalyst for further growth across digital asset markets</a>, although the same can’t be said for lackluster quarterly reports.



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Coinbase stock has now outperformed bitcoin over the past year

Coinbase CEO Brian Armstrong has almost fulfilled a pledge to sell 2% of his company stake to fund other startups.



Armstrong <a href="https://www.sec.gov/Archives/edgar/data/1679788/000120919123042425/xslF345X03/doc4.xml" target="_blank" rel="noreferrer noopener">sold</a> nearly 27,600 COIN shares last week, raking in $2.9 million. That brought the total since his announcement to 681,672 shares, generating $42.4 million for the crypto billionaire.



<ul>
<li>Armstrong’s Coinbase stake amounted to 39.6 million shares per the company’s 2022 proxy <a href="https://s27.q4cdn.com/397450999/files/doc_downloads/2022/04/COIN-Annual-Report.pdf">statement</a> (18% of the company with 59.5% voting power).</li>



<li>2% represented about 792,000 shares.</li>



<li>Armstrong has now offloaded 86% of that target.</li>
</ul>



Averaged out, Armstrong has so far sold COIN for $62.15 per share. The co-founder <a href="https://twitter.com/brian_armstrong/status/1581099571786043393">said</a> he’d direct the funds to other endeavors “like NewLimit and ResearchHub.”&nbsp;



Armstrong co-founded both startups. NewLimit is a life extension gambit and ResearchHub is a crypto-powered crowdfunding platform for scientific research. Armstrong’s net <a href="https://www.forbes.com/profile/brian-armstrong/?sh=70d293ec5077" target="_blank" rel="noreferrer noopener">worth</a> is estimated at $4.3 billion.



Coinbase stock traded at $64 when Armstrong made his pledge last October. The stock’s value had fallen 50% to a low of $31.55 by January before multiplying to $105 as of today. Blockworks has reached out to Armstrong for comment.



Those averaged figures don’t include Armstrong’s monster sale on the stock’s <a href="https://blockworks.co/news/coinbase-sec-hypocrisy-not-really">direct listing</a> in April 2021. The CEO cashed in 750,000 shares for $291.8 million — working out to $389.10 per share. Coinbase stock has since lost almost three-quarters of its value.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14480678/embed#?secret=0OohfHkMqh" data-secret="0OohfHkMqh" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Armstrong steadily sold stock via The Brian Armstrong Living Trust as part of a Rule 10b5-1 trading plan</figcaption></figure>



<h2 class="wp-block-heading">Two Coinbase insiders bought the dip</h2>



Armstrong’s sales were significant but other company insiders sold more, altogether over $5 billion in company stock across COIN’s first two days of trade.&nbsp;



Early investor and board director Fred Wilson and his firm Union Square Ventures made up nearly three-quarters of the total sold.&nbsp;



Direct listings like the one Coinbase undertook differ from initial public offerings in that no new shares are created. Company insiders must sell shares on public markets as part of the direct listing process.



To date, only two Coinbase insiders have bought any Coinbase stock since it went public, per OpenInsider data, which collates SEC filings.



<ul>
<li>Co-founder Fred Ehrsam’s fund Paradigm spent $128.9 million on 1.93 million shares ($65.67 average), with trades made in May 2022 and <a href="https://blockworks.co/news/coinbase-stock-ehrsam">May 2023</a>.</li>



<li>Shopify CEO <a href="https://blockworks.co/news/shopify-ceo-spends-3m-on-coinbase-stock-in-2-months" target="_blank" rel="noreferrer noopener">Tobias Lütke</a>, a Coinbase board member, bought more than 183,300 shares for $10 million ($54.93 average) between August 2022 and February 2023.</li>



<li>Both are well up on their buys to date (Ehrsam is up nearly 60%, Lütke almost 90%).&nbsp;</li>
</ul>



Ehrsam, whose net worth is <a href="https://www.forbes.com/profile/fred-ehrsam/?sh=3cb2705b677d" target="_blank" rel="noreferrer noopener">placed</a> at $1.5 billion, is even further ahead. Ehrsam’s trust unloaded 1.5 million COIN shares between its direct listing and Dec. 2021 for an average price of $382.20.&nbsp;



Those sales brought in more than $492 million —- almost four times what Ehrsam&#8217;s fund has spent buying the dip on Coinbase stock.



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Coinbase CEO nearly done selling 2% stake to fund other startups

Ben Strack

Investors looking for exposure to crypto can invest directly in bitcoin, ether and other crypto assets. They can also invest in the stocks of industry companies like Coinbase for example, or a range of bitcoin miners.



ETFs that gather such stocks — or even bitcoin futures contracts — into a neat basket are yet another option.&nbsp;



So as we just passed the halfway point of 2023, which method was the best option?



Well, bitcoin’s price rose above $31,000, as of Monday at 12 pm ET — up 87% year to date. The asset’s price ascension in the last six months comes after it plummeted in 2022 following a peak of nearly $70,000 back in November 2021.&nbsp;&nbsp;&nbsp;



Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) has so far outperformed ether (<a href="https://blockworks.co/price/eth">ETH</a>), which is up about 64% this year.&nbsp;



<h2 class="wp-block-heading">A look at Coinbase, MicroStrategy</h2>



Crypto exchange <a href="https://blockworks.co/tag/coinbase">Coinbase</a> is up 136% since the start of the year, despite <a href="https://blockworks.co/news/sec-sues-coinbase">the SEC launching a lawsuit against the company</a> for alleged securities violations — charges Coinbase has denied.&nbsp;



Berenberg Capital Markets analyst Mark Palmer said in a June 29 research note that Coinbase’s stock price had risen roughly 31% since <a href="https://blockworks.co/news/blackrock-files-bitcoin-etf">BlackRock filed an application with the SEC for a spot bitcoin ETF</a> on June 15.



This price jump outpaced the 20% increase in bitcoin’s price over that span, he adds — driven not only by positive sentiment toward the space given the potential entrance of a $9 trillion asset manager, but also given that Coinbase would be the custody provider for the ETF.&nbsp;



“However, we believe investors looking at [Coinbase] as a play on increasing engagement by institutions with the digital asset ecosystem should first consider the risks the company is facing that could give rise to negative headlines in the near future that would trigger a reversal of the stock’s recent gains,” Palmer wrote.



Berenberg Capital Markets analysts have previously labeled <a href="https://blockworks.co/tag/microstrategy">MicroStrategy</a> — a business intelligence firm that has custodied increasing amounts of bitcoin over the last few years — an attractive alternative to Coinbase.&nbsp;



MicroStrategy has beat Coinbase since the start of 2023, as the stock has risen 158% since then.&nbsp;



The firm revealed last week that it had <a href="https://blockworks.co/news/microstrategy-largest-btc-buy-2-years">purchased an additional 12,333 BTC</a> in the last two months — bringing its total to more than 152,000 bitcoins, currently worth roughly $4.5 billion.&nbsp;



<h2 class="wp-block-heading">Many miners up even bigger</h2>



Bitcoin miners have seen even higher stock price jumps this year than MicroStrategy, Coinbase or bitcoin itself.&nbsp;



Bit Digital’s stock price was $4.51 on Monday at 12 pm ET — up about 590% from the start of the year, according to Google Finance data.&nbsp;



The company, which had 11,513 active bitcoin miners on May 31, produced 113.2 BTC that month — a 31% increase from April.&nbsp;



Read more: <a href="https://blockworks.co/news/bitdigital-iceland-mining">Bit Digital seeks crypto tax shelter in Iceland</a>



Marathon Digital has jumped 348% year to date. The stock price of Hut 8 Mining, which last week <a href="https://blockworks.co/news/hut-8-secures-50m-loan">secured a $50 million credit facility ahead of its merge</a> with US Bitcoin Corp., is up 289%.&nbsp;&nbsp;



Riot Platforms, Bitfarms and Hive Blockchain Technologies are up 292%, 274% and 225%, respectively.&nbsp;



CleanSpark has seen year-to-date returns of 142%, while Argo Blockchain is up 67%.&nbsp;



<h2 class="wp-block-heading">How about crypto equity ETFs?</h2>



As for crypto-related ETFs that hold many of these companies, the Valkyrie Bitcoin Miners ETF (WGMI) leads the way.&nbsp;



Despite having just $13 million or so assets under management, WGMI has posted year-to-date returns of about 193%, <a href="https://etfdb.com/compare/highest-ytd-returns/">according</a> to data firm VettaFi — ranking fifth across all ETFs on that metric.



WGMI’s top holdings, as of June 30, were Advanced Micro Devices, Applied Digital, Argo Blockchain, Bitfarms and Bit Digital.



VanEck’s Digital Transformation ETF (DAPP) is a bit behind the Valkyrie fund with returns of 152% so far in 2023, the VettaFi data indicates.



Meanwhile, the Global X Blockchain ETF (BKCH) and the Bitwise Crypto Industry Innovators ETF (BITQ) are each up about 136%, while the Invesco Alerian Galaxy Crypto Economy ETF (SATO) is up about 129%.



<a href="https://blockworks.co/tag/etfs">Blockchain ETFs</a> issued by fund giants BlackRock, Fidelity and Charles Schwab have lower year-to-date returns than a number of its competitors. The iShares Blockchain and tech ETF (IBLC) and the Fidelity Crypto Industry and Digital Payments ETF (FDIG) are up about 95% and 83%, respectively, while the Schwab Crypto Thematic ETF (STCE) is up 45.5%.



Investors that have opted for the largest blockchain ETF — the Amplify Transformational Data Sharing ETF (BLOK) — have seen returns of about 49%.



Read more: <a href="https://blockworks.co/news/blok-etf-miners-allocation">Inside BLOK ETF: ‘We use the miners to play offense and defense’</a>



BLOK launched in January 2018 and has roughly $512 million in assets. Its top holding, at 5.69%, is Overstock.com, as others — each representing a position between 4% and 5% — include MicroStrategy, Marathon Digital, Coinbase and Hut 8.&nbsp;



BLOK co-portfolio manager Mike Venuto told Blockworks last month that while diversification may give up some returns in the short term, avoiding a concentrated portfolio is good in the long run.&nbsp;



<h2 class="wp-block-heading">Exposure to bitcoin futures</h2>



While the SEC has not yet allowed a spot bitcoin ETF to launch in the US, funds that hold bitcoin futures contracts first came to market in October 2021.&nbsp;



The first and largest, the ProShares Bitcoin Strategy ETF (BITO), has posted returns of about 81% in 2023, according to VettaFi. BITO has more than $1 billion in assets under management&nbsp;



Similar, and much smaller, funds by VanEck, Valkyrie and Hashdex have returned between 78% and 84%.&nbsp;&nbsp;



A couple funds with bitcoin futures exposure have looked to differentiate. Bitwise, for example, launched its Bitcoin Strategy Optimum Roll ETF (BITC) in March, which is designed to select futures contracts with the lowest level of contango.&nbsp;



BITC is up just 8% since its launch.   



<a href="https://blockworks.co/news/global-x-offers-different-type-of-bitcoin-futures-etf">The Global X Blockchain &amp; Bitcoin Strategy ETF</a> (BITS), which invests in crypto equities as well as bitcoin futures contracts, has done much better at 107%.



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How you should have played crypto investing in 2023’s first half

Coinbase shares dipped about 16% during pre-market trading Tuesday morning in New York following news that the SEC has charged the exchange for allegedly violating securities laws. 



The crash comes one day after Coinbase shares posted a 9% drop on Monday during the regular trading session, following news that <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges" target="_blank" rel="noreferrer noopener">rival exchange Binance had been sued by the securities regulator</a>.&nbsp;



<a href="https://blockworks.co/price/COIN">COIN</a>, which has dropped more than 80% since its direct listing in April 2021, has managed a substantial rebound since the start of the year, rallying around 75% year to date. <a href="https://blockworks.co/news/sec-sues-coinbase" target="_blank" rel="noreferrer noopener">Tuesday’s news</a> sent shares below the $60 level analysts have been watching. 



Read more: <a href="https://blockworks.co/news/sec-sues-coinbase-allegations">SEC Sues Coinbase: Here’s What They Allege Coinbase Did Wrong</a>



As of Monday, analysts surveyed by MarketBeat gave Coinbase a hold rating.&nbsp;



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/14035413/embed#?secret=feRm2cMJ5b" data-secret="feRm2cMJ5b" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Coinbase stock is now underperforming bitcoin and ether year to date</figcaption></figure>



Bitcoin (<a href="https://blockworks.co/news/price/BTC">BTC</a>) and ether (<a href="https://blockworks.co/price/ETH">ETH</a>) moved slightly into the red on the news, dipping about 0.6% and 0.1%, respectively. The drop was substantially less than Monday’s decline, where <a href="https://blockworks.co/news/markets-red-after-sec-binance">both tokens lost around 2%</a> after the SEC announced its Binance suit. 



The SEC names <a href="https://blockworks.co/tag/coinbase">Coinbase</a> and its holding company CGI as defendants in the suit. The regulator alleges defendants broke securities laws by operating the exchange and brokerage without registration. 



“Since at least 2019, through the Coinbase Platform, Coinbase has operated as: an unregistered broker, including by soliciting potential investors, handling customer funds and assets, and charging transaction-based fees; an unregistered exchange,” court documents released Tuesday read.&nbsp;



The <a href="https://blockworks.co/tag/SEC">SEC</a> also claims that at least 13 tokens listed on Coinbase are securities. In its Binance complaint, the agency similarly listed <a href="https://blockworks.co/news/sec-10-tokens-securities">10 tokens as “crypto asset securities</a>.” Both lawsuits list Solana’s <a href="https://blockworks.co/price/SOL">SOL</a> token and Cardano’s <a href="https://blockworks.co/price/ADA">ADA</a> as securities.



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Coinbase Stock Tanks 16% Following SEC Lawsuit 

Portfolio managers tied to the Royal Bank of Canada — the nation’s largest bank — slashed stakes across the majority of their crypto-related portfolios last quarter.



Blockworks analyzed the RBC’s SEC filings totaling 34 affiliated entities (including outside asset managers that do business with RBC), to get a pulse on institutional sentiment on equities linked to cryptocurrency operations.&nbsp;



(A number of outside asset managers that do business with one of RBC’s affiliates, including the state-run pension fund Alaska Permanent, were represented in the SEC disclosures. It’s likely as a result that this analysis includes stocks owned by third-party managers running limited partner or proprietary capital.)



Some crypto stocks were cut entirely. Embattled <a href="https://blockworks.co/news/regulatory-oversight-culpable-signature-collapse">crypto-friendly bank Signature</a> through RBC’s most recent SEC stock disclosure has fallen off from RBC’s institutional portfolio list — same with bitcoin mining firms Argo, Mawson Infrastructure and Iris Energy.&nbsp;



All are publicly traded on major exchanges, with the exception of Signature, considering the company’s stock now trades over the counter (OTC) for pennies on the dollar after its collapse.&nbsp;



RBC allocators held more than 41,000 Signature shares at the end of last year, worth nearly $4.8 million at the time. The bank would collapse less than two months later. It’s unclear exactly when the shares were sold, and the holdings appear to have represented a fraction of the bank’s overall holdings at the time.&nbsp;



Their stakes in the three bitcoin miners were far smaller, only worth a few thousand dollars altogether. SEC filings are denominated in US dollars, not Canadian dollars.&nbsp;



Other bitcoin miners are holding on, despite being slashed significantly. Funds doing business with RBC sold shares in 11 mining stocks. The selling activity for <a href="https://blockworks.co/news/riot-new-york-times-post">Riot</a>, Cipher, <a href="https://blockworks.co/news/hive-intel-efficiency-upgrade">Hive</a> and <a href="https://blockworks.co/news/marathon-sec-subpoena-montana">Marathon</a> were all cut by upwards of 40% in share count terms.&nbsp;



<ul>
<li>Financial services firm <a href="https://blockworks.co/news/bakkt-discontinues-consumer-app">Bakkt</a> was also shed by two-thirds,&nbsp;</li>



<li>bitcoin-heavy <a href="https://blockworks.co/news/microstrategy-nearly-even-on-bitcoin">MicroStrategy</a> by one-third (although $6.8 million in bonds were added),</li>



<li>and SEC favorite <a href="https://blockworks.co/news/coinbase-to-be-future-giant">Coinbase</a> by 11%.&nbsp;</li>
</ul>



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13800811/embed#?secret=RxM0gvqBtd" data-secret="RxM0gvqBtd" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">If Block were on this chart, it would dwarf all other positions</figcaption></figure>



RBC institutional investment portfolios now contain $4.8 million in COIN, per the SEC filings.



Not all moves made were bearish. RBC allocators boosted positions across 10 crypto and crypto-adjacent stocks. <a href="https://blockworks.co/news/record-q1-crypto-ma">Hut 8</a> scored a near-55% boost, going from 21,745 shares ($43,000) to 33,171 ($65,600) quarter on quarter.



Jack Dorsey’s fintech <a href="https://blockworks.co/news/jack-dorsey-block-bitcoin-mining">Block</a>, the firm behind BTC-friendly Cash App, was also bumped by half, with RBC portfolio managers altogether disclosing 2 million shares ($137.5 million), and an additional $9.2 million in corporate bonds.



<a href="https://blockworks.co/news/robinhood-class-action-dismissal">Robinhood</a> was more than doubled (now at 156,300 shares worth $1.35 million), as was ProShares’ bitcoin strategy ETF, BITO, although RBC funds still only disclosed $10,000 of the stock.



One surprise is <a href="https://blockworks.co/news/silvergate-lays-off-230">Silvergate</a>, the other crypto-friendly bank that faced an untimely demise earlier this year.&nbsp;



As of March 31, RBC portfolios held 84% more Silvergate shares than the previous quarter — 16,335 shares compared to 8,878.



<h2 class="wp-block-heading">Crypto exposure still minimal for Royal Bank of Canada</h2>



Altogether, RBC allocators held $108 million in crypto and crypto-adjacent stocks at the end of 2022. They, through their most recent disclosures, held $156.5 million — although Block makes up nearly 94% of that exposure (these figures also contain options as expressed via puts).



One year ago, that figure was closer to $200 million, and two years ago it was more than $754 million.&nbsp;



But again, those stats were skewed by RBC’s enormous stake in Block, worth $703 million. Block’s share price has since collapsed by three quarters.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13801134/embed#?secret=v3V4xmNLz2" data-secret="v3V4xmNLz2" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Block hasn’t performed very well over the year to date, either</figcaption></figure>



Bitcoin miner Greenidge has proven a manager favorite, with total share count popping more than 350% year on year, from 535 to 2,459, but the stake is tiny, just $9,000.



In fact, all of RBC’s disclosed crypto exposure is miniscule compared to its overall holdings. RBC itself managed $1.5 trillion in assets as of the first quarter, while its institutional funds disclosed a US-listed stock portfolio of almost $354 billion.



That puts RBC’s crypto exposure weight at just 0.04%. 



Just for the record.



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Royal Bank of Canada Allocators Cut Most Crypto Stocks Last Quarter

Digital asset markets are reeling from revelations that top exchange Binance may soon gobble up its major rival FTX, causing havoc among crypto stocks.



On Coinbase, bellwether crypto bitcoin fell 15% to $17,500 on Tuesday afternoon, its lowest point in almost two years. Number-two ether dropped by 22% at its worst while Binance’s native token BNB shed 12%.&nbsp;



Most top tokens have recovered slightly since their local lows. Still, the crypto market has shaved 10% from its total capitalization over the past 24 hours, breaking below the $1 trillion mark and representing $100 billion in nominal losses.



More than 69% has been wiped from a peak of $2.97 trillion witnessed 12 months ago, with roughly $1.9 trillion lost year to date. By comparison, the bursting of the dot-com bubble at the turn of the century erased <a href="https://money.cnn.com/2000/11/09/technology/overview/" target="_blank" rel="noreferrer noopener">$1.7 trillion</a> from equities markets, although adjusted for inflation that figure would be closer to $3 trillion.



Most of the sources Blockworks spoke to agree — the past 24 hours have been “insane.”



Core Scientific, one of the largest publicly listed miners, plummeted nearly 16% on Tuesday, the worst hit among bitcoin mining stocks, followed closely by Hong Kong rival Bit Mining. Core Scientific did however regain 3% during pre-market trade on Wednesday.



Hut 8 Mining Group and Digihost Technology both tumbled 12%, while Marathon Digital gave up 5% and a further 5% in the early morning session.



Surprisingly, New York-based Stronghold Digital managed to brace the impact climbing 2% on the day to finish up at $0.83 per share. The stock has however given up those gains and then some this morning.



Coinbase, practically the only pure-play crypto exchange that’s publicly-listed, took a 11% hit on Tuesday and another 5% during pre-market. Robinhood, the controversial discount brokerage which also supports crypto trading, tanked 19% to $9.74 and remains somewhat steady leading into today’s session.



Both Coinbase and Robinhood have experienced shrinking trade volumes, <a href="https://cms.blockworks.co/robinhood-layoff-costs-q2-losses-wont-delay-crypto-product-launches/" target="_blank" rel="noreferrer noopener">contributing</a> to reductions in their workforces this year, alongside both crypto-native firms and tech giants.



For scale, the tech-heavy NASDAQ 100 rose nearly 1% on Tuesday while the broader S&amp;P 500 gained more than half a percent.



<h3 class="wp-block-heading">Crypto bank Silvergate hardest hit among digital asset stocks</h3>



Digital asset managers Galaxy Digital and Bakkt Holdings sank 17% and 2.5% respectively on the day, with the latter falling another 2% during pre-market.&nbsp;



Both stocks have slumped by about 80% of year to date. Digital asset financial services firm Eqonex, a nano-cap stock which shuttered its exchange operations in August, also dropped nearly 9% on the day to $0.40.



Galaxy, spearheaded by Wall Street maverick Mike Novogratz, is rumored to be cutting its workforce by 15% following a <a href="https://cms.blockworks.co/galaxy-digitals-stock-rises-despite-posting-555m-q2-net-loss/" target="_blank" rel="noreferrer noopener">$555 million net loss</a> posted for the second quarter. Galaxy’s third-quarter earnings call is slated for Wednesday at 8:30 am ET.



Crypto custodians Silvergate and Signature Bank each ended more than 22% and 4% in the red, now down 73% and 57% respectively this year. Silvergate was the worst performing crypto-related stock on Tuesday of the 50 Blockworks analyzed. It fell an additional 7% during pre-market.



San Diego-based Silvergate, which collects demand deposits from crypto infrastructure providers and exchanges, posted a loss of $13.5 million in third-quarter deposits <a href="https://www.forbes.com/sites/emilymason/2022/10/18/silvergate-stock-tumbles-as-3q-deposits-retreat-for-banker-to-crypto-exchanges/?sh=4ff4e6275902" target="_blank" rel="noreferrer noopener">compared to Q2</a>.



Software company (and pseudo bitcoin ETF) MicroStrategy wasn’t far behind, sliding 20.5% and another 8% before Wednesday’s open. MicroStrategy owns <a href="https://cms.blockworks.co/are-companies-aside-from-microstrategy-still-buying-bitcoin/#:~:text=With%20the%20purchase%2C%20MicroStrategy%20now,return%20a%20request%20for%20comment." target="_blank" rel="noreferrer noopener">130,000</a> BTC ($2.31 billion), acquired for nearly $4 billion at an average of $30,639 as of late September, putting its paper losses at around 40%.



Elon Musk’s automaker Tesla, which held 9,720 BTC ($172 million) per its latest disclosures, tumbled 3%, although it’s more likely the stock was impacted by Musk dumping <a href="https://www.bloomberg.com/news/articles/2022-11-09/musk-sells-3-95-billion-of-tesla-stock-after-twitter-takeover" target="_blank" rel="noreferrer noopener">$3.9 billion</a> in company stock following his buyout of social media platform Twitter.



The negative price action across crypto stocks amounted to hurting digital asset ETFs. Bitwise’s Crypto Industry Innovators ETF (BITQ), which is weighted considerably towards MicroStrategy, Coinbase and Silvergate, stumbled 10%.



<h3 class="wp-block-heading">Crypto industry caught off guard by FTX collapse</h3>



The volatility felt Tuesday is reminiscent of past events this year following a contagion that had gripped some of the industry’s largest lenders including Celsius Network and Voyager Digital — now undergoing bankruptcy proceedings.



With public <a href="https://twitter.com/LucasNuzzi/status/1590122590206824448?s=20&amp;t=1ROZBsSFtb3lAWV99IQopA" target="_blank" rel="noreferrer noopener">speculation mounting</a> over whether FTX <a href="https://twitter.com/AriDavidPaul/status/1590027413937090561?s=20&amp;t=L8h4QiopjfCJkEUoAerzLA" target="_blank" rel="noreferrer noopener">rehypothecated</a> client crypto to bail out its sister firm Alameda Research in Q2, investors are fleeing for the exit. Users have decided against the risk of keeping their crypto on FTX and have decided to <a href="https://www.coindesk.com/business/2022/11/08/ftxs-bitcoin-balance-plunges-to-just-one/" target="_blank" rel="noreferrer noopener">pull their funds</a>.



Despite the <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/?outputType=amp" target="_blank" rel="noreferrer noopener">leak</a> of Alameda’s alleged partial balance sheet late last week, most in the industry have been caught off guard. Developments have escalated quickly and within a few days FTX CEO Sam Bankman-Fried could soon be forced to sell.



Questions remain as to why FTX —- which was valued as much as $36 billion at its last funding round just nine months ago — is grasping at a bailout from its biggest rival. Proponents are now asking whether FTX <a href="https://twitter.com/AriDavidPaul/status/1590027413937090561?s=20&amp;t=L8h4QiopjfCJkEUoAerzLA" target="_blank" rel="noreferrer noopener">deployed</a> its customer and partner capital to fund other ventures.



“In general, it’s poor practice for exchanges to be utilizing their customers’ tokens for other purposes, which exposes said tokens to unnecessary risk,” CoinGecko’s co-founder Bobby Ong told Blockworks.



Exchanges should strive to have customer tokens fully custodied, with the totals and wallet addresses made transparent for public scrutiny, he said. “All crypto exchanges should do Merkle-tree <a href="https://cms.blockworks.co/news/what-are-proof-of-reserves-and-can-they-build-back-trust/">proof-of-reserves</a>,” Binance’s CEO Changpeng Zhao tweeted Tuesday. 



Read more: <a href="https://cms.blockworks.co/news/what-are-proof-of-reserves-and-can-they-build-back-trust/">What Is Proof of Reserves and Can It Build Back Trust?</a>



“Banks run on fractional reserves. Crypto exchanges should not.” The Binance head said his exchange would start to implement proof-of-reserves “soon” in an attempt to provide “full transparency.”



Tony Chapple, head of trading at Australian digital asset firm Zerocap, told Blockworks that the event will escalate consolidation through the crypto space, which he reckons had been on the cards for a while.



“Consolidation to firms with proven ability to control their balance sheet risk and employ economies of scale will be the long-term winners here,” Chapple said.



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FTX Contagion Hits Crypto Stocks Following Binance Buyout

<div id="highlights-block_62ab9431b5ebf" class="highlights">
 <ul>
 <li>Crypto contagion has spread into equities with digital asset exposure</li>
 <li>Short interest for multiple top crypto stocks has peaked this month</li>
 </ul>
 
</div>



Stock traders looking to profit from tumbling cryptocurrency prices took aim at major players in digital assets this week, with Coinbase and MicroStrategy among the hardest hit.



Short sellers Monday bet more than $631 million, cumulatively, on the continued descent of six top crypto stocks, accounting for 39% of their collective trade volume for the day.&nbsp;



Spot crypto markets shed 16% over the weekend, suggesting short sellers had eagerly awaited equity markets opening to capitalize on the chaos.



Top US crypto exchange Coinbase took most of the wrath, facing shorts of $393 million Monday — 74% above its yearly average, according to FINRA data compiled by Blockworks. FINRA tracks volume on both the NYSE and Nasdaq, but its data excludes private markets and could count short trades that don’t specifically convert to an open short.



The same day, Coinbase <a href="https://cms.blockworks.co/coinbase-cut-workforce-ceo-wary-of-potential-recession/" target="_blank" rel="noreferrer noopener">said</a> it would lay off almost one-fifth of staff: more than 1,000 employees. Chief executive Brian Armstrong cited a potential US recession. Coinbase shares have since fallen some 16% since Friday’s close.



Also on Monday, short sellers bet $124 million against MicroStrategy — the data intelligence firm run by bitcoin bull Michael Saylor.



MicroStrategy stock, on average, recorded $70 million in shorts daily over the past year, which means Monday saw 77% more MicroStrategy short selling than usual. The tech company’s shares are now down 25%.



MicroStrategy maintains the largest corporate bitcoin reserves of any public company, holding 129,218 BTC as of April, worth $2.7 billion today. The company’s market capitalization is just $1.8 billion.



New York-based Signature Bank saw an even bigger short surge. Through its crypto-specific Signet service, Signature <a href="https://seekingalpha.com/article/4512236-signature-bank-tumbles-with-crypto-mayhem-time-to-buy" target="_blank" rel="noreferrer noopener">oversees</a> $29 billion in crypto deposits (as of May), including $7 billion in stablecoins. Market participants including exchanges, miners, funds and fiat-backed stablecoins, such as Circle’s USD Coin (USDC) and TrueUSD, all bank with Signature.



Short sellers initiated around $53 million in bets against Signature Monday, 82% above its yearly average. The company’s shares went on to shed 20%.



<figure class="wp-block-image"><a href="https://lh3.googleusercontent.com/ZvW-6FF1BUE0KK8c-vaDHQWkR6sbf2TFD452xfVcrrAwd1hOKgIJHbA_NfCcouBWpjK2PQgrzf5EUcWDDRStLRKWuGIpYe0P0AmhPghmt336plyXhoR3Aqw2M4mefGtxrEC1duZQCGvRBMxUuQ"><img decoding="async" src="https://lh3.googleusercontent.com/ZvW-6FF1BUE0KK8c-vaDHQWkR6sbf2TFD452xfVcrrAwd1hOKgIJHbA_NfCcouBWpjK2PQgrzf5EUcWDDRStLRKWuGIpYe0P0AmhPghmt336plyXhoR3Aqw2M4mefGtxrEC1duZQCGvRBMxUuQ" alt=""/></a><figcaption>Short selling volume over the past year | Data source: FINRA via TradingView</figcaption></figure>



The mounting losses are despite the bank having “virtually zero credit risk” via its crypto operations, as its digital asset balance sheet is almost entirely deposits, according to a <a href="https://seekingalpha.com/article/4512236-signature-bank-tumbles-with-crypto-mayhem-time-to-buy" target="_blank" rel="noreferrer noopener">recent</a> analysis.&nbsp;



Rival Silvergate, on the other hand, on Monday only saw 14% more shorts than average, or roughly $24 million. Silvergate <a href="https://ir.silvergate.com/news/news-details/2022/Silvergate-Capital-Corporation-Announces-First-Quarter-2022-Results/default.aspx" target="_blank" rel="noreferrer noopener">oversaw</a> about $15.8 billion in assets under management as of March 31, the most recent available data — making the firm one of the largest crypto banks.&nbsp;



In February, the firm spent $182 million to acquire assets and technology once intended to power Meta’s failed stablecoin offering Diem. Silvergate also issued a $205 million bitcoin-backed <a href="https://www.businesswire.com/news/home/20220329005397/en/Silvergate-Bank-Issues-205-Million-Loan-to-MacroStrategy-Collateralized-by-Bitcoin" target="_blank" rel="noreferrer noopener">loan</a> to MicroStrategy in March. Its share price is also down 20% since Friday’s close.



Curiously, crypto mining stocks weren’t targeted to the same degree. US-listed outfits Marathon Digital and Riot Blockchain recorded $27 million and $10 million worth of shorts on Monday, respectively, both significantly under their yearly daily averages of $53 million and $67.5 million.&nbsp;



<h3 class="wp-block-heading">Short sellers could target crypto mining stocks next</h3>



Shorting specialists might not be focusing on top miners just yet, as those companies are, at least in theory, large enough to acquire fresh mining rigs and electricity sources relatively cheaply, bitcoin mining consultant Alejandro De La Torr told Blockworks.&nbsp;



It could put some public crypto miners in a better position than some of their smaller, unlisted counterparts, at least in the short term. Todd Esse, co-founder of bitcoin mining fund HashWorks, told Blockworks he expects shorters will target certain vulnerable mining stocks moving forward.



In any case, short interest — a measure of how many outstanding shares are attributable — for nearly all these stocks are now at yearly highs, according to data from finance and blockchain analytics startup quantX.



MicroStrategy&#8217;s short interest hit 30% in May (3.4 million shares of 11.30 million outstanding), but has since dropped slightly. Signature Bank shorts have surged: Its short interest is up 60% month over month, now at 2.57 million shares of almost 63 million outstanding.



“Pure bitcoin plays have slightly declined in short interest, whereas broader crypto plays have spiked this month,” quantX co-founder Oisin Maher said. The short interest in cryptoasset manager Voyager Digital’s US-listed equity, in particular, has exploded some 600% in June, while Galaxy Digital’s has been steadily growing all year.&nbsp;



<figure class="wp-block-image is-resized"><a href="https://lh6.googleusercontent.com/ko7Hp-Hp--Df_JFT8Kbn2XML73c3YN0Sr30S7I7bpjNCdFu0CACJmrsP7OSX53eVK45c-zjbfyez9YOBTtQ6c01hIsQwx15p2Q7kAGqDltq2EDk54WB7pCx5O1Bd5NcmDIlzWr3p7AEMKfEkXQ"><img loading="lazy" decoding="async" src="https://lh6.googleusercontent.com/ko7Hp-Hp--Df_JFT8Kbn2XML73c3YN0Sr30S7I7bpjNCdFu0CACJmrsP7OSX53eVK45c-zjbfyez9YOBTtQ6c01hIsQwx15p2Q7kAGqDltq2EDk54WB7pCx5O1Bd5NcmDIlzWr3p7AEMKfEkXQ" alt="" width="840" height="415"/></a><figcaption>Coinbase short interest over the past year | Source: quantX via Bloomberg Terminal</figcaption></figure>



Top crypto stocks have already booked more short volume in June than last September — when bitcoin was worth more than double its current price.&nbsp;



Still, FINRA data shows far more bets on crypto’s demise last month, which saw the Terra ecosystem implode and lending platform Celsius begin to falter.&nbsp;



Indeed, altogether in May, more than $11 billion worth of shorts were opened against Coinbase, MicroStrategy, Signature, Silvergate, Marathon and Riot — almost 70% levied at Coinbase.&nbsp;



Short sellers only logged more bets against these crypto stocks at one other time throughout the past year; October and November together saw more than $19 billion worth of shorts opened, when bitcoin was just retreating from its $69,000 record high.



The total value of all cryptocurrencies has tanked 65% since then — indicating there’s some very happy short sellers out there. Recent <a href="https://money.yahoo.com/crypto-stock-short-sellers-raked-in-4-billion-this-year-134004038.html" target="_blank" rel="noreferrer noopener">data</a> shows they&#8217;ve raked in almost $4 billion by shorting crypto stocks this year.



This article was updated at 5:07 am ET, Jun 17 to include reference to Silvergate&#8217;s loan to MicroStrategy.



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Short Sellers Are Betting Big Money on Cryptocurrency’s Demise

<div id="highlights-block_62797ac6dfb8f" class="highlights">
 <ul>
 <li>Bitcoin’s price has tracked blue chip tech stocks such as Apple, Amazon and Microsoft all year</li>
 <li>The recent market downturn has only strengthened that correlation</li>
 </ul>
 
</div>



Nearly $240 billion has been wiped from crypto markets since Friday as the macro headwinds weighing on digital assets intensify.&nbsp;



Bitcoin fell 15%, from $36,000 to trade around $30,700 at press time. Ether and XRP, respectively, shed 14.5% and 18%, while Solana&#8217;s SOL and binance coin were the hardest hit of the top cryptocurrencies – both dropping 19%.



Overall, crypto is now worth $1.4 trillion (a touch less than Alphabet’s market capitalization), having lost 15% over the weekend to its nadir since July 2021.&nbsp;



Crypto stocks also took a beating. Top mining stock Marathon Digital slumped 17% Monday; Coinbase tanked 18%; and MicroStrategy crumbled nearly 25% — which collectively equates to more than $5.4 billion in shareholder losses.



But sour crypto markets echo poor performing equities across the board. The S&amp;P 500 dropped 2.5% as markets opened, and the tech-heavy NASDAQ 100 sank 3.5%.



The S&amp;P and NASDAQ have now respectively lost 16% and 26% year to date. For scale, cryptocurrencies’ total value collapsed more than 35% over the same period, according to TradingView data compiled by Blockworks.



Indeed, crypto and equity markets are increasingly correlated, particularly with tech stocks, as bitcoin’s price has tracked blue chip tech stocks such as Apple, Amazon and Microsoft all year.



And little has changed in the most recent downturn. In fact, correlation is tightening.&nbsp;



“Right now, correlations are appearing across and within most asset classes, not just crypto,”  Beimnet Abebe, vice president of principal trading at <a href="https://www.galaxydigital.io" target="_blank" rel="noreferrer noopener">Galaxy Digital</a>, told Blockworks. 



Recent significant changes to monetary policy, Abebe said – on top of the highest inflation rates in a generation – have put pressure on crypto and other assets following a time of “extremely loose” federal bank quantitative easing-friendly regimes.&nbsp;



“Over the long run, we will see a decoupling of cryptoassets as tokens mature and develop all with their own idiosyncratic features,” Abebe said.



<h3 class="wp-block-heading">Crypto capitulation breeds innovation</h3>



But what will it take to see crypto actually decouple from tech stocks?&nbsp;



David Nage, portfolio manager at crypto investment firm Arca, told Blockworks it might take full capitulation.



Nage reasoned that a previous de-pegging of correlations between digital assets and tech stocks happened after March 2020, when both equity and crypto markets spiraled due to the pandemic becoming a black swan event.



Crypto markets took off in April, May and June of 2020 while tech stocks were still finding their footing. Many attributed those surges to widespread lockdowns, with day traders tapping digital assets with their stimulus checks.&nbsp;



So, it stands to reason that a rebound in crypto markets might be triggered once we see more experimentation across DeFi and gaming and decentralized finance (GameFi), according to Nage.



“I definitely believe the way that digital assets will potentially de-peg from its correlation with equities will be to attract interest, and it’s new platforms and innovation that create that,” he said.



But Nage isn’t seeing tremendous innovation in DeFi (decentralized finance). Instead, he’s mostly witnessing copy-paste projects that mimic Ethereum-powered DeFi projects that were popular in 2020: decentralized exchanges and automated market makers.



“What we’ve seen from past crypto winters, especially during 2018, is that there will be a period of time when innovation starts, when founders start to buckle down – they start building platforms that garner our attention and use-cases rather than raising funds every three months,” he said.



Nage pointed to three crypto companies that raised money through the last big “crypto winter”: Fireblocks, OpenSea and Blockdaemon. These are “formative pieces of infrastructure that have made a lot of things possible today,” he said.&nbsp;



<h3 class="wp-block-heading">Crypto can still become a tool to battle inflation</h3>



If other layer-1 chains have been hotbeds for innovation, why does the market still follow bitcoin?



“Bitcoin is the most liquid of all cryptoassets, so that’s where institutions are focusing their energy, making it likely to lead crypto market sentiment for the foreseeable future,” Galaxy’s Abebe said.



But crypto proponents once claimed digital assets could serve to hedge against growing inflation and even diversify portfolios. Bitcoin’s losses have instead amplified inflation over the past year, while crypto’s high correlation with tech stocks means digital assets serve as pseudo-leveraged bets on the world’s largest companies.



To Nage, the problem of inflation is now staring us in the face. It’s something that multiple generations haven’t had to deal with before. He envisions a period of adjustment which will birth new playbooks, guided by reviewing what we did before to curb inflation, “and that will take some time.”



“At the end of the day, our generation alongside newer generations are always going to be incredibly interested in digital assets and technology,” Nage said. “We’re the mobile-native, crypto-native generation – games, mobile devices, the internet, this is what we know.”



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Crypto Is More Correlated With Tech Stocks Than Ever – How Do We Decouple?

<div id="highlights-block_6261888fcedd1" class="highlights">
 <ul>
 <li>Coinbase, Voyager Digital, Marathon Digital stocks have plummeted in 2022, far beyond declines of bitcoin and ether</li>
 <li>The marked deviation comes as major cryptocurrency exchanges, including Coinbase, are prioritizing diversifying revenue streams away from trading fees</li>
 </ul>
 
</div>



Though bitcoin, ether and other cryptocurrencies have dipped so far this year, digital asset stocks have seen even steeper — often record — declines.



What companies may do to combat losses — if they even can — remains to be seen.



Coinbase’s stock is down roughly 45% year to date. Voyager Digital is down about 65% in 2022, meanwhile, Galaxy Digital has slipped 29%.



Most crypto stocks have historically traded as a proxy for cryptoassets themselves — especially mining companies — calling into question the current lack of correlation, according to Lionel Rebibo, CEO of crypto index trading platform Trakx.



“As the cryptoassets experienced heavy outflows, so did crypto stocks,” Rebibo told Blockworks. “The move on the stocks was probably exacerbated by the fact that they were quite often grossly overvalued.”



Bitcoin traded around $42,200 at noon ET Thursday, according to data compiled by Blockworks — down roughly 12% since the start of the year. Ether has dropped 18% to about $3,100 over that span.



The steep price fluctuations have led to lower crypto trading volumes so far this year, according to Chris Allen, an analyst at Compass Point Research and Trading.



A pullback from retail investors — impacting companies that derive the bulk of their revenue from trading fees — has led to institutional de-leveraging, affecting Coinbase and Galaxy, Allen added.



Despite clearer regulatory guidance, including <a href="https://cms.blockworks.co/bidens-crypto-executive-order-may-be-watershed-moment-despite-lack-of-specifics/" target="_blank" rel="noreferrer noopener">President Biden’s executive order</a> mandating government agencies study digital assets, the industry expects no major changes anytime soon, he said.



<h3 class="wp-block-heading">Coinbase provides a proxy for the market</h3>



Cathie Wood, CEO and chief investment officer of ETF manager Ark Invest, said during the <a href="https://cms.blockworks.co/crypto-and-tradfi-collide-at-miami-etf-conference/" target="_blank" rel="noreferrer noopener">Exchange ETF Conference</a> in Miami last week that the disconnect between digital asset company valuations and stocks has continued to widen at a rapid clip.



She pointed to Blockchain.com’s funding round last month that boosted its valuation to $14 billion, up nearly threefold from $5.2 billion last March. At the same time, Wood said, Coinbase plummeted 40% to all-time lows, adding that the drop “makes no sense.”



Coinbase declined to comment for this story, but executives at the company addressed its stock decline during a February earnings call. Chief Financial Officer Alesia Haas said then the stock had traded in tandem with digital assets.



“We honestly don’t truly understand this, as this correlation does not take into account the growth in our market share, the diversification of our business beyond investing and let alone the future potential of our business as we expand into new assets and new product streams,” Haas said at the time.



Though transaction revenue still accounts for the majority of the exchange’s revenue, the company generated more than $500 million in subscription and services revenue last year — a tenfold increase from 2020 — including $214 million during the fourth quarter, shortly after Coinbase launched its trading service that imposes transactions fees in exchange for a monthly payment.



Coinbase <a href="https://cms.blockworks.co/coinbase-unveils-its-social-nft-marketplace/" target="_blank" rel="noreferrer noopener">this week unveiled</a> the beta of its NFT marketplace that resembles an Instagram-like social media platform.



“The messaging from companies is that there will be periods of high and low activity and that they are building for the long term,” Allen said. “[Coinbase] is investing heavily, which is why we expect them to operate at a loss this year and next.”&nbsp;&nbsp;



Voyager’s decline comes as the company reported estimated total first quarter revenue of roughly $100 million — down from $165 million the previous quarter. Its users grew from 3.2 million to 3.5 million in the first three months of the year, trailing analyst expectations.



<h3 class="wp-block-heading">Miners’ tie to crypto prices, tech stocks&nbsp;</h3>



Crypto miner equities have also dropped. Marathon Digital is down 38% since the beginning of the year, while Riot Blockchain dropped 40% over the same period.



Many investors peg Marathon Digital, which owns roughly 9,400 bitcoins, as a proxy for the price of the cryptocurrency, according to Charlie Schumacher, vice president of corporate communications.



“While we often do trade with bitcoin, we are also correlated with the Nasdaq, which is down 15% year to date,” Schumacher told Blockworks. “If investors reallocate their portfolios and go ‘risk-off,’ they go risk-off across the board, and that impacts large bitcoin miners like us.”



Marathon is working to deploy 23.3 exahashes — a measure of power supply that impacts mining speed — of computing power by early next year.



Though the company is looking to launch a research lab and an incubator, Schumacher said bolstering its bread-and-butter of mining remains Marathon’s priority.



There’s skepticism among industry participants about miners’ lofty growth targets, including Marathon’s goal to increase hash rage 500% in just over a year, he added — calling it “very much a prove-it to me moment for the industry.”



Overall, Rebibo said he doubts that crypto companies can do much in the short and medium terms to counter stock price falls when cryptoasset prices drop.



“When a company is clearly tagged in a certain sector, its stock will strongly reflect the fundamental drivers of this sector — whatever the company does to differentiate itself,” he said.&nbsp;



Spokespeople for Voyager and Galaxy declined to comment on stock price. A representative for Riot Blockchain did not return a request for comment.



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Crypto Declines Outpaced by Plummeting Digital Asset Stocks

<div id="highlights-block_61eb36bba2579" class="highlights">
 <ul>
 <li>The iShares Blockchain and Tech ETF would track the NYSE FactSet Global Blockchain Technologies Index</li>
 <li>BlackRock CEO Larry Fink said in October he sees “huge opportunities” for digital currency</li>
 </ul>
 
</div>



The world’s largest asset manager has an ETF in the works that would focus on blockchain technology.&nbsp;



The filing comes as crypto markets have cratered, with bitcoin dropping 10.8% to $36,900 as of Friday evening. The iShares Blockchain and Tech ETF would track the investment results of the NYSE FactSet Global Blockchain Technologies Index, according to <a href="https://www.sec.gov/Archives/edgar/data/1100663/000119312522014777/d286885d485apos.htm">a Friday regulatory disclosure</a>.



The index consists of companies involved in the development and deployment of crypto technologies in the US and abroad.



The proposed fund plans to invest at least 80% of its assets in stocks included in the index, according to the filing. It may allocate up to 20% in futures, options, swap contracts, cash and cash equivalents — all on equities. The fund will not invest in crypto directly or indirectly via crypto derivatives.&nbsp;



The disclosure did not indicate a ticker or expense ratio for the planned offering.&nbsp;



A spokesperson for the company declined to comment beyond the filing.&nbsp;



Investors have clamored for ETFs with ties to crypto in <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/">the absence of a spot bitcoin ETF</a>. The largest such offering on the market is Amplify Investments’ Transformational Data Sharing ETF (BLOK), which has grown to $1.1 billion of assets since its January 2018 launch.



“iShares filing for a blockchain ETF was inevitable given their focus on mega-trends and that the universe of companies continues to expand,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, said in a Twitter post.&nbsp;



BlackRock has nearly 400 iShares ETFs trading in the US, with combined assets under management of roughly $2.4 trillion. The firm’s total AUM totals about $10 trillion.



The asset manager revealed in January 2021 that its Strategic Income Opportunities Fund (BASIX) and its Global Allocation Fund (MDLOX) <a href="https://cms.blockworks.co/which-mutual-funds-etfs-are-making-crypto-related-investments/">could invest</a> in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission (CFTC).



CEO Larry Fink <a href="https://cms.blockworks.co/blackrock-ceo-sees-huge-opportunities-in-digital-currency/">told CNBC in October</a> that while he sees “huge opportunities” for digital currency, he is unsure how the crypto space will fare over the long term.&nbsp;



<a href="https://cms.blockworks.co/blackrock-ceo-clients-not-asking-about-crypto/">In a July earnings call,</a> Fink told investors that he believed crypto could one day become an asset class, but long-term investors were not asking the firm about crypto’s fit in their portfolios.



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