It has been another eventful week for cryptocurrencies, with strong gains for many digital coins – including “joke” altcoin dogecoin [DOGE] – while newly-listed Coinbase [COIN] looks set to post impressive numbers in its upcoming Q1 results. Meanwhile, the world’s biggest crypto exchange, Binance, has run into trouble with German regulator, BaFin, over its new stock tokens.
Bitcoin [BTC] and ethereum [ETH] both reached new all-time highs recently, a rally coinciding with Coinbase’s IPO. Analysts predict Coinbase’s direct listing will boost the crypto market, with Wedbush analyst Dan Ives suggesting "the Coinbase IPO is potentially a watershed event for the crypto industry". He added: "Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years."
Despite cryptocurrencies’ strong performance, the Blockchain theme is marginally lower over the week on our ETF performance screener, closing last week down 0.31%. The S&P 500 index is down 0.11% over the same period.
“Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years” - Wedbush analyst Dan Ives
Musk helps power dogecoin price acceleration
Dogecoin’s price leapt higher yet again last Wednesday, in what has been a volatile few weeks for the crypto, after Tesla [TSLA] CEO Elon Musk’s latest tweet about the altcoin. Musk tweeted “The Dogefather” to his 52.4 million followers, ahead of a guest appearance on a US TV show. The crypto, which takes its name from the Shiba Inu dog in a “doge” meme that became popular in 2013, rose 20.66% from $0.271 to $0.327 on Wednesday. DOGE pushed on to $0.372 as of Sunday 2 May, heading back towards 16 April’s all-time high of $0.450. Dogecoin now has a market cap of $48bn, according to Coindesk.
Reddit users, who famously fuelled a “short squeeze” on retailer GameStop [GME] shares earlier this year, propelling them vastly higher, also generated interest in dogecoin, which subsequently soared 629% between 27 and 29 January. Thomas Perfumo, head of business operations and strategy at Kraken Digital Asset Exchange, explained why he believes the exchange had a “significant uptick” in dogecoin as the GameStop saga unfolded: “the overarching narrative behind the coin’s 30x run this year is a protest against systemic inequities in the traditional financial industry – dogecoin is, after all, the original ‘meme asset’.”
Coinbase poised to report bumper Q1 numbers
Coinbase’s share price may have cooled since soaring 71.8% to $429.54 intraday on its first day of trading, following its much-hyped 14 April IPO, but the shares remain 19.05% above the list price of $250, having ended the week up 2.07% to $297.64. Ahead of the US exchange’s Q1 results on 13 May, investors.com reports analysts are expecting earnings per share (EPS) of $2.97, which would represent a staggering leap of 1,756%, with revenue estimated to jump 849% to $1.81bn – $500,000 more than its revenue for the whole of 2020.
Mizuho analyst, Dan Dolev, struck a more cautious note, after initiating coverage on the stock with a neutral rating and a $285 price target, 4.25% lower than last week’s close. Dolev said: "Over time, Coinbase … may face downward pressure from platforms like PayPal [PYPL] and (Square’s [SQ]) Cash App [which] ...primarily use their crypto trading products as engagement tools, whereas Coinbase relies on its crypto trading products as its main source of revenue and profitability."
“Over time, Coinbase … may face downward pressure from platforms like PayPal and (Square’s) Cash App [which] ...primarily use their crypto trading products as engagement tools, whereas Coinbase relies on its crypto trading products as its main source of revenue and profitability” - Mizuho analyst, Dan Dolev
Overall, however, among eight analysts covering the stock, Coinbase has five buy, one overweight and two hold ratings, with an average price target of $448.63, according to the Wall Street Journal, which represents a potential 50.72% gain from its current level.
Binance in hot water with German authorities
The world’s biggest cryptocurrency exchange, Binance, may have violated European securities rules with the launch of its stock tokens, which enable its customers to buy just one-hundredth of a regular share using its own crypto, Binance USD (BUSD). Germany’s financial supervisory authority, BaFin, said last week that the stock tokens, which give investors exposure to shares in Tesla, Coinbase, MicroStrategy [MSTR], Microsoft [MSFT] and Apple [AAPL], have been identified as “suspicious”, reports Coindesk.
BaFin said that by failing to issue a prospectus prior to launching the stock tokens, Binance has violated its prospectus obligation under Article 3 of the European Prospectus Regulation: "BaFin has grounds to suspect that Binance Germany is selling shares in Germany in the form of 'share tokens' without offering the necessary prospectuses."
This apparent oversight could see Binance hit with a fine of up to €5m ($6m), or 3% of Binance’s annual revenue, reports Coindesk. Law firms in Hong Kong have already raised concerns over the stock tokens, while the Financial Times reported that the UK’s Financial Conduct Authority is “working with the firm to understand the product, the regulations that may apply to it and how it’s marketed.”