On Wednesday, the shares of Robinhood, Coinbase, and MicroStrategy experienced significant surges.
For quite some time now, investors have been mulling over the influence of the U.S. presidential election on the crypto market. On Wednesday, with the election results confirmed, both cryptocurrencies and crypto-related stocks observed a surge in value. Bitcoin (BTC) showed the most significant symbolic shift, increasing by 8.5% within the last 24 hours, as of 10 a.m. ET. However, certain stocks demonstrated even more noticeable growth.
Stock prices for Robinhood Markets (HOOD) climbed as high as 12.2% in the initial trading hours, Coinbase Global (COIN) rose an impressive 20.1%, while MicroStrategy (MSTR) reported an uptick of 14.7%. At 10:30 a.m., the stocks had climbed 8.6%, 15.3%, and 10.4% respectively.
Bitcoin's impressive rebound
The surge in MicroStrategy's stock share is directly related to Bitcoin due to the company's substantial investment in the token. MicroStrategy CEO, Michael Saylor, has openly expressed his desire to further invest in Bitcoin using the company's funds. This continued upward trend in Bitcoin's value is beneficial for MicroStrategy.
Robinhood and Coinbase, on the other hand, can gain indirectly from increased cryptocurrency trading on their platforms. Coinbase has experienced a substantial surge in trading volume on its exchange, amounting to $6.1 billion in the past 24 hours, compared to the usual range between $1 billion and $2 billion daily. Higher trading volume and volatility contribute to the growth of Coinbase's exchange business, which still remains its largest source of revenue.
Robinhood may also witness an increase in trading given the 33% decrease in crypto trading volume during the third quarter of 2024. Crypto represents only around $20 billion of the $152 billion that the company oversees. If it proves to be a profitable sector, it could significantly boost both revenue and the company's financial stability.
Aiming for regulatory clarity
The real potential for upside lies in the anticipated regulatory clarity in the crypto sector, thanks to the new laws enacted by Congress and more favorable regulators, particularly at the Securities and Exchange Commission (SEC). The SEC has been aggressive in its pursuit of crypto-related companies and token creators over the past few years, but with minimal success in court. This aggressive approach has impeded development and innovation within the U.S.
Clarity regarding what is and isn't legal would be beneficial for the entire industry. Companies like Coinbase have been actively developing infrastructure tools such as Base blockchain, smart wallets, and a developer platform. If financial transactions and asset ownership records transition to the blockchain, it could pave the way for substantial growth potential for these companies.
Will the crypto market's surge sustain?
The optimism surrounding the crypto market is palpable, but there's a great deal of uncertainty ahead. While changes in regulations and a surge in innovation could make the crypto market and blockchain more mainstream, this doesn't guarantee equal value distribution among companies.
A significant portion of the innovation in recent years has been driven by stablecoins, as opposed to Bitcoin or altcoins. As a result, long-term trading of tokens might decrease. Additionally, new startups might emerge and carve out a significant share of the market, particularly if they are built with new crypto rules in mind.
Despite being bullish about the long-term potential of blockchain, I am skeptical about this short-term surge in the crypto market. The seemingly inevitable impact of the election may not materialize as expected. Therefore, I am choosing to observe instead of jumping into the surge, as I wait to see what fundamental changes the next few months bring.
The surge in Bitcoin's value has incentivized MicroStrategy to consider further investing in Bitcoin, as reflected in their stock's 14.7% increase. Investors looking to capitalize on this lucrative market can consider diversifying their portfolio by investing in platforms like Robinhood and Coinbase, which have seen significant growth due to increased cryptocurrency trading.
