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Coinbase and MicroStrategy are riding Bitcoin higher today
Bitcoin (CRYPTO: BTC) was the talk of cryptocurrency market again on Wednesday and once again crossed the $1 trillion market cap mark. Bitcoin is up 5.3% over the past 24 hours as of 3 p.m. ET.
Following Bitcoin’s move is Global Coinbase (NASDAQ: COIN), which jumped as much as 14.5% in today’s trading, and MicroStrategy (NASDAQ:MSTR), up 12.8%. The two stocks are currently up 13.7% and 12.2% respectively.
Bitcoin’s move
Today the value of Bitcoin has increased for several reasons. First of all, investors are generally more optimistic about the economy and earnings, which is pushing up the value of higher-risk assets like growth stocks, and Bitcoin often trades alongside growth stocks.
But there is also a lot of money flowing into Bitcoin through Exchange Traded Funds (ETFs). Black rock‘S iShares Bitcoin Trust alone went from 2,621 Bitcoins on January 11th to 105,280 Bitcoins held at market close on Tuesday, February 13th. That amount of money accumulating in the sector will certainly push Bitcoin higher.
How Coinbase and MicroStrategy make money with Bitcoin
MicroStrategy is an obvious beneficiary after reportedly holding 190,000 Bitcoin with an average purchase price of $31,224 as of February 5. This company has long leveraged the price of Bitcoin and with purchases continuing this is more so than ever.
Coinbase is in a slightly different position, as it provides cryptocurrency services and exchanges around the world. And it is the custodian of the vast majority of Bitcoin ETFs, including those from BlackRock.
Another business that Coinbase is involved in is prime brokerage, which means it is the trading platform that holds cryptocurrencies for institutional investors. So, if money flows into cryptocurrencies from institutions, Coinbase will likely make money from both custody and trading fees.
Cryptocurrencies can give and take away
It is important to remember that cryptocurrencies can be very volatile and Bitcoin’s position as “digital gold” in the crypto ecosystem is not guaranteed. Traders have been bidding up Bitcoin in anticipation of not only the ETFs, but also the next halving expected in about two months, which has been a catalyst for prices in the past.
I think investors should look at where utility is being built on the blockchain, and that’s where I think Coinbase is well positioned. The company owns one of the largest trading platforms in the world, is the custodian bank of choice for large institutions, and is building blockchain solutions such as the Base blockchain and crypto wallets.
The story continues
Speculating in cryptocurrencies can lead to strong days like today and long dark periods like we’ve had in 2022. That’s why I think infrastructures like Coinbase are a better place to be.
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Travis Hoium has positions in Coinbase Global. The Motley Fool has positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
Coinbase and MicroStrategy are riding Bitcoin higher today was originally published by The Motley Fool