Coinbase CEO Brian Armstrong. Brian van der Beek – Bloomberg via Getty Images
Shares of companies exposed to cryptocurrencies rose this week as investors cheered a major ruling on one token as a victory for the industry.
Coinbase Global, Inc. It has gained 34% this week and was down 1.6% on Friday, the best performance for the period since mid-March.
Other crypto-linked stocks also had good weekly performances. Robinhood Markets, Inc. Bakkt Holdings Inc. rose 15% this week, its best in nearly a year. Gained 30%. Bitcoin mining companies Marathon Digital Holdings, Hut 8 Mining Corp., Riot Platforms, Inc. and Cipher Mining Inc. also posted weekly gains, with some selling on Friday.
Thursday’s ruling that Ripple Labs Inc.’s token was a security when it was sold to institutional investors — but not to the public — was the biggest contributor to the gains. The decision boosted optimism in bitcoin ETF applications, which had boosted investor sentiment and bitcoin earlier in the week.
“This is a positive read for the coin as it is a precursor to crypto token sales through exchanges not violating securities laws,” Needham analyst John Todaro wrote in a note, raising his price target to $120. Starting at $70 on buy-rated stock. “We believe this result will moderate the regulatory pressure on the stock.”
Of course, this ruling is unique to Ripple and should not be applied hastily across the industry, Benjamin Salisbury of Hite Capital Markets said in a note.
“We note that this ruling is specific to the facts of this case and caution against applying this ruling to the Coinbase litigation,” Salisbury said. “Given the potential implications for securities laws, we also expect the SEC to appeal this ruling.”
Outside of constraints, short-covering could also lift crypto-linked stocks as 2023 rallies are set to exploit contrarian traders.
Last month, short sellers bought back $407 million worth of Coinbase shares to exit their positions, according to data from S3 Partners LLC. This year, Coinbase shorts have a paper loss of $2.9 billion, making it the seventh most profitable short behind Tesla Inc., Nvidia Corp., Apple Inc., Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc. .