Client Portal

If you were a bit confused by today's crypto price action you are not alone. Following a good PCE number, with the DXY rolling and IWM and RSP outperforming, one would expect green candles. But it seems that the selling was in anticipation of the SEC rendering a lawsuit against Consensys alleging their noncustodial wallet, MetaMask, is operating as an unregistered securities BD. Of the securities listed in the lawsuit were liquid staking tokens LDO11.92%  and RPL4.24% . The obvious caveat here is that I am not a lawyer, but our initial read on this is that it is a similar argument that they made in their lawsuit against Coinbase (COIN-0.64% ) and their Coinbase Wallet product. This case was thrown out by the judge, and thus we think that any weakness related to this lawsuit is worth fading.

Massive beat by COIN-0.64%  Revenue - $1.64B ($1.32B Est.) EPS - $4.40 ($1.07 Est.).

We anticipate that Coinbase (COIN-0.64% ) will exceed top-line expectations this afternoon when they report earnings after the market close, driven by increased trading volumes and growth in the USDC market cap. We expect revenues to come in at $1.56B for the quarter, compared to a consensus estimate of $1.36B. The more intriguing aspect of this earnings report will be an examination of the assets on Coinbase's balance sheet. According to the company's previous 10-K, these assets, currently marked at approximately $450 million will begin to be marked at fair value in Q1, rather than at the cost less impairment. Given that Coinbase has invested in many assets that have outperformed in this bull market, it is possible that we will see a significant expansion of the company's balance sheet, and a positive impact on their EPS figures.

For those looking for related upside to Bitcoin BTC, the crypto miners are highly correlated: MARA0.51%  RIOT-1.37%  IREN4.46%  Even COIN-0.64%  See regression-based price levels as Bitcoin price changes

Reminder that COIN-0.64%  is set to report its earnings after today's close. The consensus forecasts $826M in Q4 revenues and an EPS of $0.02. Based on publicly available trading volumes and conservative estimates for their other business segments, we anticipate they will surpass analyst expectations. However, the guidance provided will be the more important element. We disagree with the common concern that ETFs may hinder Coinbase's growth. We see ETF investors as additive, and believe that core crypto users, who value 24/7 access to their assets (including trading during nights and weekends), will continue to support the platform. Fee compression will happen, but not immediately. It's also important to note that during the peak of the last bull market in 2021, only 25% of Coinbase's revenue stemmed from BTC transactions (rest were from ETH and altcoins). Moreover, new initiatives like their perpetual futures exchange, global lending platform, and Base are expected to begin contributing to the P&L this quarter. Additionally, with the overnight rate remaining above 5%, income from stablecoins is poised to continue being a lucrative business line.

If one wants a leveraged exposure to bitcoinBTC, the miners are. Below regression stock price to bitcoin price:

• Price Now -> Price If BTC$100k
  • MARA $26 -> $377
  • RIOT $16 -> $463
  • HUT $16 -> $206
  • COIN $151 -> $2,832

From the above:

• Exchanges: COIN-0.64%
• Miners: MARA0.51%  RIOT-1.37%  HUT-2.30%

These are historical correlations. But you see the implied upside is large.$100k bitcoin is basically a double but miners could rise more

For those following the potential spot ETF approval ofBTC #bitcoin, the clues are becoming louder and tangible

• see tweet from chief counsel of Grayscale
• “Forms”?

The crypto miners are highly leveraged to the spot price of Bitcoin

• RIOT-1.37% MARA0.51% HUT-2.30%  evenCOIN-0.64%
• See potential upside for each stock ifBTC reaches$100,000

https://x.com/craigsalm/status/1742903003399463313?s=46&t=ox_Iko2UDeJ6GX8T2qbNkw

Looks like investors starting to bid up Bitcoin and crypto stocks too post-FOMC

• BTC
• MARA0.51% RIOT-1.37% HUT-2.30% COIN-0.64% GBTC-1.19%

As we mentioned a couple of weeks ago, declining interest rates are finally enabling crypto equities to align with the bullish trend in underlying crypto assets. Over the past four trading days, we have observed that miners are finally beginning to participate in this upward movement. In addition to lower rates and lower energy prices, it is possible that miners are also benefiting from broader investor participation following the Binance settlement. We continue to likeCOIN-0.64% ,MARA0.51% ,RIOT-1.37% , andWGMI0.47% .

The crypto market experienced a significant rally overnight, with Bitcoin (BTC) reaching the$30,000 mark, Solana (SOL-1.01% ) approaching$28, and notable bids finally coming in for Ethereum (ETH) and ETH-related assets likeOP4.08%  andARB0.16% . For those who may have overlooked our recent bullish outlook, it's important to consider that crypto equities often lag behind crypto assets. Therefore, we think it's right to anticipate a potential delayed rally in Coinbase (COIN-0.64% ) and miners today/into next week. As highlighted in our strategy note from yesterday, we maintain a constructive stance, but will continue to closely monitor trading volumes, capital flows, and on-chain activity.