Opinion: Bitcoin ETFs Will Hit These Three Crypto Stocks Hard
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Opinion: Bitcoin ETFs Will Hit These Three Crypto Stocks Hard
Bitcoin's victory could ultimately be detrimental to crypto stocks such as Coinbase, Marathon Digital, and MicroStrategy.
Navigating Web3 tides with focused insightsBy Tom Carreras, DL News
Translated by Luccy, BlockBeats
Editor's note: The launch of Bitcoin ETFs marks a new milestone in cryptocurrency investing, with Bitcoin surging 6% and breaking above the $49,000 mark. However, analysts from Maple Finance and North Rock Digital suggest this victory could negatively impact certain crypto-related stocks such as Coinbase, Marathon Digital, and MicroStrategy.
Analysts argue that with the arrival of spot Bitcoin ETFs, traditional investors may now prefer direct exposure to Bitcoin over these equities. Each company faces unique challenges, signaling the start of a new competitive era for the crypto market. BlockBeats translates the original article as follows:
This morning saw the launch of spot Bitcoin ETFs in the U.S.—a historic moment that makes accessing investment in the top cryptocurrency easier than ever before.
But analysts from Maple Finance and North Rock Digital say Bitcoin’s win could ultimately hurt crypto stocks like Coinbase, Marathon Digital, and MicroStrategy.
The crux lies here: these stocks have historically served as proxies for traditional investors seeking Bitcoin exposure without using Bitcoin futures ETFs.
Now that spot Bitcoin ETFs are available in the U.S., investors may "move away from these less ideal instruments toward the spot Bitcoin exposure they originally wanted," analysts say.
Bitcoin surged 6% today, briefly surpassing $49,000 before pulling back to around $46,000. Meanwhile, MicroStrategy dropped 4%, Coinbase fell 5%, and Marathon slid 14%.
Each company is grappling with its own distinct challenges.
Built-in Headwinds
"No doubt Coinbase is a great business, but ETFs introduce a lot of new competition into the landscape," Quinn Thompson, head of capital markets and growth at Maple Finance, told DL News.
SEC approval of ETFs sets the stage for a pricing war among fund managers. Cathie Wood’s Ark Invest will charge zero fees in the first year, while BlackRock charges 0.12% during the same period, rising to 0.25% afterward.
Coinbase told DL News it isn’t worried about competition, despite analyst concerns over its high retail trading fees.
According to CoinGecko, Coinbase traded over $2.2 billion worth of Bitcoin in the past 24 hours—a figure comparable to expected ETF inflows.
"Some estimates call for $2 to $4 billion in inflows into the new Bitcoin ETFs in the first few days of trading," Thompson said. "That's a serious encroachment on what used to be America's large moat."
Meanwhile, Bitcoin mining firms like Marathon must contend with the upcoming halving, when the Bitcoin network cuts mining rewards in half. Occurring every four years, the next halving is currently expected in April.
With Bitcoin block rewards halved, miner revenues will drop sharply, while their massive energy costs remain unchanged—or even continue to rise.
"The halving poses a significant risk to profitability, which can only be offset by higher prices (in my view, above $75,000) or increased transaction activity and fees (at least two to three times current levels)," Thompson said.
"Higher-cost producers may face some difficulties in the months following the halving," he added.
According to a JPMorgan report from October, while Marathon is one of the world’s largest Bitcoin miners, it also has some of the highest power costs in the industry.
"This will likely force miners to issue more equity to extend their runway and dilute existing shareholders. It's a proven strategy they keep using—so there shouldn't be much surprise," Thompson said.
"Gold ETFs and gold miners both exist in public markets, and people invest in them for different reasons. If they can coexist, why can't Bitcoin ETFs and Bitcoin miners?" Charlie Schumacher, vice president of corporate communications at Marathon, told DL News.
Schumacher added: "Overall, we believe this event is very positive for the industry, as it could bring more participants into the space and grow the pie for everyone."
Regarding MicroStrategy, the report notes its stock is currently trading at a significant premium to the underlying fundamental book value—that is, the value of the operating company plus its holdings of 189,150 bitcoins.
However, analysts say uncertainty around whether MicroStrategy might sell down its Bitcoin holdings—combined with co-founder Michael Saylor’s recent sale of company shares and risks of additional downside pressure—makes the investment riskier than simply gaining exposure via a Bitcoin ETF.
The report compares MicroStrategy to Grayscale’s Bitcoin Trust, which also traded at a premium for years, "but reversed and began trading at a discount when the asset fell out of favor due to better alternatives and deteriorating sentiment."
Coinbase and MicroStrategy did not immediately respond to requests for comment.
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