Why Bitcoin, Coinbase, and Silvergate Capital Are Rising Today

What happened

The price of the world’s largest cryptocurrency, Bitcoin ( BTC 2.49% ), and several crypto-related stocks including the large cryptocurrency exchange Coinbase Global ( COIN 3.42% ) and the crypto bank Silvergate Capital ( SI 5.82% ) all are rising today. The cryptocurrency market has been in recovery mode this week, while Silvergate and Coinbase received positive sentiment from Wall Street.

The price of Bitcoin had risen more than 4% over the last 24 hours, as of 3:07 p.m. ET today. Meanwhile, shares of Coinbase and Silvergate traded nearly 3.3% and 5.6% higher, respectively, during normal trading hours.

So what

Bitcoin is having a nice week and recently reached roughly $43,971, which is close to its highs for 2022, following a major pullback that began last October. It’s hard to say exactly what is leading to the recovery and there’s no indication that it will last.

But BlackRock CEO Larry Fink recently said in his annual letter to shareholders that Russia’s invasion of Ukraine will hasten the speed at which central banks warm to and ultimately utilize digital assets.

“The war will prompt countries to reevaluate their currency dependencies,” Fink wrote in his letter. “Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate.”

Ukraine, for instance, has received roughly $100 million in crypto donations. Deputy Minister of Digital Transformation Alex Bornyakov said recently that because “the national bank is not really operating, crypto is helping to perform fast transfers, to make it very quick and get results almost immediately.”

The flip side is in Russia, where digital assets may be helping some in the country avoid sanctions. Russian lawmakers have also discussed accepting cryptocurrencies like Bitcoin as payment for oil. Although there are both good and bad outcomes, it’s likely countries and their governments and central banks will look at and think about cryptocurrencies differently now.

In other news, Silvergate and Coinbase saw a lot of bullish sentiment from Wall Street, as well some negative sentiment.

Earlier this week, Bank of America analyst Brandon Berman initiated a buy rating on Silvergate and a $200 price target, implying strong upside from current levels even after a nice run this week. Silvergate has built a proprietary real-time payments network that allows parties on the network to send and clear payments instantly, which better facilitates crypto trading. Parties that join the network bring large sums of deposits to Silvergate Capital, which the bank can deploy into higher-yielding assets as interest rates rise. The bank is expected to see profits soar in a rising-rate environment. 

Coinbase has also seen some action on Wall Street. Earlier this week, the famous short-seller Jim Chanos disclosed that he and his fund are shorting the stock because they believe the company’s earnings are inflated.

But today on Yahoo! Finance, MoffettNathanson analyst Lisa Ellis called Coinbase a “one-of-a-kind asset providing the infrastructure layer for the crypto economy.” MoffettNathanson has maintained its buy rating on Coinbase and has a price target of $600, implying significant upside from Coinbase’s current roughly $190 share price.

Now what

I certainly think Fink makes some interesting points about how cryptocurrencies and digital assets have been positioned during the Russia-Ukraine conflict. Governments and central banks will likely take an even closer look at how they can use these newer digital currencies.

I am very interested and uncertain right now as to how Bitcoin will perform in the upcoming rising-rate environment. But I am bullish on Coinbase and Silvergate, as I like companies that provide the infrastructure for the burgeoning crypto industry, especially as the case for crypto adoption gets clearer every day.