Why cryptocurrency stocks are skyrocketing today
The shares of several companies closely linked to the cryptocurrency market soared on Tuesday, February 2. Cryptocurrency Asset Manager Riot blockchain (NASDAQ: RIOT) gained up to 10.1%, China-US cryptocurrency mining expert Marathon Patent Group (NASDAQ: MARA) peaked at 11.6%, and Canadian Crypto-Mining Company Beehive blockchain (OTC: HVBT.F) peaked at 12.3%. Data analysis specialist MicroStrategy (NASDAQ: MSTR), which converted its long-term cash reserves into direct bitcoin holdings, also followed suit with a 6.8% gain at 3 p.m. EST. Shares are skyrocketing as many of the major cryptocurrency tokens are on the rise today which should translate into better financial results for all of these companies.
Bitcoin prices increased 5.6% in 24 hours and Ethereum prices gained 12.5% over the same period. Ripple has stabilized after a wild weekend, and this token for cross-border transactions has now gained 42% in seven days. Other big names earning over 10% today include Ethereum competitor Cardano and the bitcoin alternative known as Litecoin.
Cryptocurrencies are known for their volatile price fluctuations, which often collapse or soar for no particular reason. This is not the case today, as the blockchain-based industry actually has some good news to share.
- Index fund manager Bitwise Asset Management announced a new bitcoin fund, intended to provide an alternative to the popular Grayscale Bitcoin Trust (OTC: GBTC) with reduced management costs and under the wing of the asset management giant loyalty (NYSE: FNF). If approved by financial regulators, this fund will help bitcoin’s liquidity and price stability while pressuring pioneers like Grayscale to improve their existing fund options.
- The Gemini cryptocurrency exchange, run by the Winklevoss twins of Facebook Fame, launches interest-bearing cryptocurrency accounts. Gemini’s crypto savings account offers Annual Percentage Returns (APY) of up to 7.4%, which is a generous interest rate close to the national average of less than 0.1%. If this type of cryptocurrency deposit accounts becomes mainstream, it could be a strong case for treating crypto tokens as serious currency and / or investment assets.
- MicroStrategy is not yet done buying bitcoin. The company said on Tuesday it had acquired another 295 tokens worth $ 10 million in cash. The company now owns 71,079 bitcoins, worth $ 2.54 billion at current bitcoin prices. The initial purchase price for this bitcoin stash was around $ 1.15 billion. Large companies following MicroStrategy’s lead to shift some of their long-term investments to bitcoin and other crypto tokens could make all the difference to the financial stability of these markets.
On top of all this, the business mogul and You’re here CEO Elon Musk recently backed the not-so-serious Dogecoin token in a series of tweets, but last night he said they were just jokes. In reality, Musk thinks “bitcoin is a good thing” and is a supporter of that specific token. He also said bitcoin was “on the verge of being widely accepted by mainstream financiers.” When the richest man in the world speaks, the markets react.
No one knows where bitcoin, Ethereum, and other cryptocurrencies are going, especially as governments around the world are still developing their legal and regulatory frameworks to manage these innovative but risky digital assets.
I happen to have a collection of various cryptocurrencies myself, all of which were created from a very small purchase of bitcoin six years ago. So far, I consider these tokens more of a fun experience than a serious investment. That could change as the regulatory system grows and the cryptocurrency market crystallizes into something solid. For now, I’m happy to watch the crypto stocks above the sideline.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.