The cryptocurrency exchange’s stock jumped on Thursday after it announced a collaboration with BlackRock that will enable its institutional clients to purchase bitcoin.
The most recent increase in Coinbase stock was 18%. They increased by as much as 40% earlier in the day.
Clients of BlackRock’s Aladdin institutional portfolio management platform, which provides services to institutional investors, will have access to the company’s Prime product, the company announced on its blog. Coinbase will offer trading, custody, prime brokerage, and reporting capabilities for cryptocurrencies. Managing more than $8 trillion in assets, BlackRock is the largest asset manager in the world.
According to alternative data firm Quiver Quantitative, the ticker COIN also surpassed GameStop as one of the names that were cited the most on Reddit’s WallStreetBets on Thursday.
“Our institutional clients are increasingly interested in accessing the markets for digital assets and are concerned about how to effectively manage the operational lifetime of these assets,” said Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock, in a statement. Through the agreement, they would be able to “manage their Bitcoin exposures directly in their existing portfolio management and trading workflows.”
This enthusiasm serves as a beacon in the dark for the cryptocurrency industry. The sector has had numerous hacks and breaches, including this week’s attacks on Solana and Nomad. The price of the cryptocurrency has fallen along with the overall decline in risky assets, and it has been further hurt by the financial fallout from the Terra crash in the spring. Many investors believe that institutional acceptance is essential to advancing the development, constancy, and price of bitcoin as well as maybe the larger crypto market.
Analysts are unsure of why Coinbase stock has been surging recently. On Wednesday, the stock rose 20%. By Wednesday’s closure, the shares were still down by roughly 70% for the year 2022.
This week’s unexpected rise in the price of Coinbase may have been caused by so-called “short squeezing,” in which investors who were betting against the stock rushed to close out their short bets. According to FactSet, more than 22% of Coinbase’s publicly traded shares are being sold short. Since the stock has increased in value, these investors must now repurchase it to compensate for their losses, which helps boost the gains.
Despite the market’s dread and the drop in Coinbase’s share price, Citi said on Thursday that this is just the “fizzle before the sizzle” and that it will be watching for a stock turnaround over the next three months.
Analyst Peter Christiansen wrote in a note to investors, “There are some favourable developments developing,” pointing to probable stablecoin legislation and Ethereum’s long-awaited switch to proof-of-stake.