As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
COINBASE LAUNCHING CRYPTO DERIVATIVES PRODUCT: Coinbase Derivatives Exchange (COIN), formerly FairX, a CFTC regulated Designated Contract Markets futures exchange, will launch its first listed crypto derivatives product on June 27, 2022: Nano Bitcoin futures contract, with each contract sized at 1/100th of a bitcoin, Coinbase said in a Thursday blog post. Upon the June 27th launch, BIT futures will be accessible for trading via several leading third-party retail brokers and clearing firms, it said. Coinbase Financial Markets is awaiting approval for its license to operate a futures commission merchant to be able to offer futures directly to clients.
The company also said in a Wednesday blog post: "Later this year, we'll begin sunsetting Coinbase Pro to migrate all advanced trading into one unified Coinbase account, bringing customers access to popular features like staking, Borrow, dapp wallet, and Coinbase Card from a single platform balance. Advanced Trade on Coinbase.com is already available globally, with the same volume-based fees as Coinbase Pro. Over the coming weeks, we'll be rolling out Advanced Trade in the Coinbase mobile app along with other improvements to make Advanced Trade an upgrade from Coinbase Pro for every customer. We'll notify customers again when we are ready to share concrete dates for sunsetting Coinbase Pro."
Additionally on Wednesday, BTIG analyst Mark Palmer lowered the firm's price target on Coinbase to $290 from $380 but kept a Buy rating on the shares. The analyst is citing "severe crypto market downturn", but also remains positive on the company's ample liquidity relative to its cash burn. Palmer further contended that Coinbase is a large and well capitalized firm that is positioned to benefit from a material shakeout in the global crypto exchange space, which he views as an "increasingly likely scenario" as challenging crypto market conditions persist. Meanwhile, Mizuho analyst Dan Dolev wondered if recent trading patterns point to "potential crypto fatigue." Coinbase volumes appear to surge during sell-offs, but "fail to impress during the brief rallies," Dolev said. The analyst added that analyzing Coinbase volume trends in May and June highlights a potential decline in appetite for crypto trading versus the last two years, as volumes on days when bitcoin declined "dramatically exceeded" volumes on days when bitcoin increased. He kept a Neutral rating on Coinbase shares with a $45 price target.
MARATHON DOWNGRADED TO NEUTRAL: On Thursday, B. Riley analyst Lucas Pipes downgraded Marathon Digital (MARA) to Neutral from Buy with a price target of $9, down from $34. Given the sharp decline in the bitcoin price over the preceding weeks, he now uses the average price quarter-to-date of $33,805 and assumes $22,000 for the remainder of the quarter to arrive at his Q2 estimates for his digital miner coverage. In Q3 and Q4, he now underwrites bitcoin prices of $25,000 and $30,000, respectively, Pipes noted. Additionally on Friday, Cowen analyst Stephen Glagola initiated coverage of Marathon Digital with a Market Perform rating and $7 price target. While he contends that the company has a differentiated, asset-light model that is advantageous for scaling mining rigs, he sees elevated operational and execution risk on its contracted 23.3 EH/s given its reliance on third-party suppliers, a lack of infrastructure control and the incremental capital required to reach its target.
VOYAGER MAY ISSUE NOTICE OF DEFAULT: Voyager Digital (VYGVF) announced Wednesday its subsidiary, Voyager Digital Holdings, has entered into a definitive agreement with Alameda Ventures related to the previously disclosed credit facility, which it said "is intended to help Voyager meet customer liquidity needs during this dynamic period." VDH entered into a definitive agreement with Alameda for a $200M cash and USDC revolver and a 15,000 BTC revolver. As previously disclosed, the proceeds of the credit facility are intended to be used to safeguard customer assets in light of current market volatility and only if such use is needed. In addition to this facility, as of June 20, Voyager has approximately $152M cash and owned crypto assets on hand, as well as approximately $20M of cash that is restricted for the purchase of USDC. Voyager concurrently announced that its operating subsidiary, Voyager Digital, may issue a notice of default to Three Arrows Capital for failure to repay its loan. Voyager's exposure to 3AC consists of 15,250 BTC and $350M USDC. The company made an initial request for a repayment of $25M USDC by June 24, and subsequently requested repayment of the entire balance of USDC and BTC by June 27, Voyager stated. "Neither of these amounts has been repaid, and failure by 3AC to repay either requested amount by these specified dates will constitute an event of default. Voyager intends to pursue recovery from 3AC and is in discussions with the company's advisors regarding the legal remedies available. The company is unable to assess at this point the amount it will be able to recover from 3AC," Voyager stated.
Following the news, BTIG analyst Mark Palmer downgraded Voyager Digital to Neutral from Buy and removed his previous price target of $15. Voyager may issue a notice of default to 3AC, which during the past week has failed to meet margin calls while facing liquidity challenges, and it disclosed that its exposure to the fund consists of $350M in USDC and 15,250 bitcoin worth $311.8M at current prices, noted Palmer. When he asked Voyager management about its exposure being collateralized and whether it had hedges or other risk management tools, they directed him to their public commentary, noted Palmer, who moved to the sidelines given that his ability to assess the situation and to value the stock is "limited" in the absence of what he calls "this critical information." Craig-Hallum analyst George Sutton said he is suspending his estimates, rating and price target for Voyager Digital. While he can "envision a scenario where the company successfully addresses the current financial issues," he is suspending his previous Buy rating and $5 price target given the vulnerability of the balance sheet in light of now knowing that the agreement with Alameda is "effectively a backstop for the company to manage what will likely be significant customer withdrawals," Sutton said. Meanwhile, Keefe Bruyette analyst Kyle Voigt said he will continue covering Voyager Digital, but has moved to a Covered Not Rated designation, removing his previous Outperform rating and C$5.50 price target. While he will continue covering the company, he does not feel he can "adequately value its shares at this point," Voigt said. Additionally, Noble Capital analyst Joe Gomes downgraded Voyager Digital to Market Perform from Outperform. While Sam Bankman-Fried's Alameda Ventures has agreed to loan Voyager, the uncertainty of when, or if, Voyager will receive its loans back and the quality of its remaining crypto loans raises significant questions about the company's near-term liquidity, Gomes said.
BITFARMS SELLS 3K BITCOIN FOR $62M: Bitfarms (BITF) announced Tuesday that it adjusted its HODL strategy to improve liquidity and strengthen its balance sheet. Bitfarms has sold a total of 3,000 bitcoin for approximately $62M and closed on its previously announced $37M in new equipment financing with NYDIG ABL improving corporate liquidity by approximately $100M. This brings total BTC holdings to 3,349, inclusive of month-to-date production, which is currently averaging about 14 BTC per day. Bitfarms has applied a portion of the proceeds to rebalance its indebtedness by reducing its BTC-backed credit facility with Galaxy Digital (BRPHF) a further $28M from $66M to $38M. As of June 20, 2022, Bitfarms held cash of $42M and 3,349 BTC valued at approximately $67M at a BTC price of $20,000.
CORE SCIENTIFIC STARTED WITH BUY: Cowen analyst Stephen Glagola initiated coverage of Core Scientific (CORZ) on Friday with an Outperform rating and $3.10 price target. The company's "significant scale and best-in-class operations" create a competitive advantage over peers as they enable Core to continue its growth trajectory while increasing its share of network hash rate, Glagola said. The analyst believes the company is well positioned to navigate the current environment. Meanwhile on Thursday, B. Riley analyst Lucas Pipes lowered the firm's price target on Core Scientific to $7 from $10 and kept a Buy rating on the shares. Given the sharp decline in the vitcoin price over the preceding weeks, he now uses the average price quarter-to-date of $33,805 and assumes $22,000 for the remainder of the quarter to arrive at his Q2 estimates for his digital miner coverage. In Q3 and Q4, he now underwrites Bitcoin prices of $25,000 and $30,000, respectively, Pipes noted.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin rose about 4% this week at $21,284 in U.S. dollars, according to TradeBlock.
Bitcoin
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Bitcoin
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Bitcoin
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Ethereum
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Litecoin
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Dogecoin
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Coinbase
+3.4 (+5.77%)
Marathon Digital
+0.515 (+7.32%)
Voyager Digital
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Bitfarms
+0.07 (+5.04%)
Galaxy Digital
+0.14 (+3.01%)
Core Scientific
+0.095 (+4.65%)
AMD
+2.56 (+3.11%)
Nvidia
+3.58 (+2.20%)
Ideanomics
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Riot Platforms
+0.335 (+6.79%)
OSTK
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Pareteum
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Srax
+0.07 (+2.07%)