Bitcoin has rocketed over the past six months, more than doubling to $68,004 as of Thursday.
Investors’ interest in the primary digital currency has exploded with January’s introduction of bitcoin exchange-traded funds, or ETFs, particularly the ones offered by BlackRock and Fidelity Investments. (To be sure, bitcoin is also off 8% from its record set in mid-March.)
In addition, bitcoin is approaching its 21-million-coin supply cap. About 19.7 million bitcoins are currently in circulation.
Related: Bitcoin halving for beginners: How the process works, impacts price of BTC
The currency is now approaching a “halving” date. That’s when the reward for bitcoin miners gets cut in half. Mining refers to people who successfully use their computers to participate in bitcoin's blockchain network as transaction processors and validators. They’re creating new blocks on the blockchain and receive rewards for their efforts.
The reward for a successful mining expedition drops 50% every four years (halving). This month, it will be lowered to 3.125 bitcoin from 6.25 bitcoin. That means less incentive for miners to create supply, putting upward pressure on the currency.
Perhaps the strongest factor behind bitcoin’s recent jump is speculative fervor. Bitcoin is used for very little legitimate commerce.
It’s essentially a vehicle for speculation that investors can use to bet whether bitcoin’s value will go up or down. No fundamentals dictate its price.
Note that during bitcoin’s six-month run, dogecoin, established as a joke, has tripled. Dogecoin’s logo is a dog.
The impact on Coinbase
Whatever the reason for the strength of bitcoin and other digital currencies, it’s all good for Coinbase Global (COIN) , the country’s biggest cryptocurrency exchange.
Its revenue registered $905 million in the fourth quarter, up 50% from a year earlier. Net income registered $273 million, swinging from a loss of $557 million.
So it’s no surprise that Coinbase stock has more than tripled in the past six months – to $251 on Thursday. Its share price is almost exactly at its April 2021 IPO price of $250.
Related: Cathie Wood snags $53 million of this scorched tech stock
The company is spreading its wings, receiving a registration license in Canada this month, which means it can operate there.
However, not everything is rosy in the U.S., where Coinbase has scuffled with the Securities and Exchange Commission.
In the latest tussle, a federal judge ruled last month that an SEC lawsuit against the company can proceed.
That complaint accuses the company of facilitating trades of at least 13 cryptocurrencies that should have been registered as securities. The SEC also charges Coinbase with illegally operating as a national securities exchange without registering with the SEC.
Analysts’ Views of Coinbase
The company is doing well enough that at least two Wall Street houses have raised their price targets on the stock.
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Oppenheimer analysts now see Coinbase reaching $276 in the next 12 to 18 months, up sharply from $200 previously. They maintain their outperform rating. The $276 target indicates a 10% upside from current levels.
The analysts estimated the company’s trading volume doubled in the first quarter from a year earlier.
As for the stock, “at this level of trading, we are cautious about near-term volatility, but remain positive on the long-term adoption of blockchain technology,” they said. “We believe Coinbase can be one of the beneficiaries for this long-term trend.”
They also don’t believe the legal battle with the SEC is going away. The regulator has “well-pleaded allegations which plausibly support the claim that Coinbase operated as an unregistered intermediary of securities,” the analysts said.
“We currently believe that this case will be a long legal battle and will likely go to the Supreme Court to get the final decision.”
Related: Analyst revamps MicroStrategy stock price target after Bitcoin buy
Meanwhile, Keefe, Bruyette & Woods raised Coinbase’s price target to $230 from $160, confirming its market-perform — effectively neutral — rating. The Stifel & Co. subsidiary lifted its earnings estimates, reflecting first-quarter volume, The Fly reports.
Cathie Wood, one of America's most popular money managers, has been selling shares of Coinbase in recent weeks, perhaps taking profits. It's still the second biggest holding in her flagship Ark Innovation ETF (ARKK) .
For years, she has been an evangelist for cryptocurrencies.
Another big bitcoin supporter, MicroStrategy and its executive chairman, Michael Saylor, have gone gigantic into the crypto. In mid-March, the software intelligence company bought 9,245 bitcoin for $623 million.
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