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Our letter last week highlighted Coinbase’s direct listing, with COIN shares beginning to trade within hours of our mailing. A week later, what do we take away from this historic episode in the emerging cryptocurrency industry?
Let’s talk about the stock price first, with the first trades being made at $380 per share. As a result, the company’s capitalization was over $70 billion. The price reached highs of $429 in the first hour of trading, before finally closing down for the day. Nevertheless, just like that, Coinbase became an exchange with a valuation higher than the New York Stock Exchange.
Several Coinbase executives took advantage of the hype to secure a life-changing payday. Data from Capital Market Laboratories and confirmed by filings on Coinbase’s Investor Relations website shows a total of 12,965,079 shares were sold by insiders, worth over $4.6 billion at COIN’s $344.38 per share at last Friday’s close. Notable transactions include Coinbase CFO Alesia Haas selling some 255,500 shares at a price of $388.73 (though her Form 4 states that she retains options), while CEO Brian Armstrong sold 749,999 shares in three transactions at various prices, netting a total of $291,827,966.
Among investors betting on the stock’s rise, Cathie Wood’s Ark Invest’s funds bought $246M worth of the stock on the first day of trading. TSLA shares were liquidated to raise the capital needed for the purchase. Analyst Mark Palmer has issued a price target of $500 while Gil Luria is even more optimistic with a future estimate of $650 per share. However, we have to admit that it has been a failed bet in the short term, with the stock trading today between $320 and its low of $300.
Martin Lalonde, President of the firm, was invited by Geneviève Pettersen of QUB Radio to discuss this event. You can listen to the interview here (in French).
Not a week goes by without the adoption of cryptocurrencies growing, and this, everywhere on the planet. Most notably, in the past few days, real estate company WeWork announced that it now accepts payments in bitcoin, ethereum and USDC via payment processor BitPay. More importantly, however, the company has confirmed that it plans to keep these payments in bitcoin rather than converting them to fiat currency. Here’s a new corporate giant that will have cryptocurrencies on its balance sheet! The media colossus Time, which will soon celebrate its centenary, is not staying in the past. It has also announced that it will now accept payments in digital currencies for subscriptions.
Speaking of companies with bitcoins on their balance sheet, we see once again that everything Elon Musk touches turns to gold. Indeed, ten weeks after announcing that Tesla was converting some of its treasury into bitcoins, the company has so far made a billion dollars in profits with this move.
The most reputable financiers are not left behind in this adoption of the digital currency market. Indeed, the manager Baillie Gifford is the most recent of his group to make a notable investment in the industry. The latter has just invested $100 million in Blockchain.com. The investment is part of Blockchain.com’s $300 million Series C raise, which was announced last month. “Baillie Gifford has a long history of backing transformational growth companies at their early stages,” a spokesperson said. The Scottish asset manager stressed that the firm has “a growing conviction” in Blockchain.com’s management team and the company’s value proposition, as well as “in its ability to make long-term investment returns for our clients.”
While China has long demonstrated outspoken and public opposition to the crypto industry, here’s a surprising twist from its central bank. The Deputy Governor of the People’s Bank of China has indeed called bitcoin an alternative investment, a clear change of tone regarding the asset. The country’s leading position in the development and adoption of a national digital currency is surely no stranger to this.
The DOGE and SafeMoon cryptocurrencies seem to be absolutely everywhere on social media right now, so we’ve been asked several times what we think about them. Very little good on the fundamental side and certainly not an opportunity, at least for the fund. Without going into a detailed analysis, it seems worth mentioning that DOGE is a joke born crypto, with infinite supply, with 10,000 tokens created every minute. So we’re talking about an inflationary cryptocurrency which, moreover, is not subject to any tangible development. It’s even worse for SafeMoon, where the majority of the tokens remain in the hands of its creator. He could pull the rug under investors at any time, making a fortune and leaving many bag holders with worthless tokens. In short, although someone could take advantage of a good timing and thus make a short-term profit in the adventure, we do encourage extreme caution with these two cryptocurrencies.
Let’s finally talk about prices and the technical picture as we conclude this communication. We saw a fairly sharp correction on Saturday night, with the price falling from over $60,000 to a low of $51,500. A major power outage in China seemed to be the catalyst to a correction that quickly intensified with a record $10 billion futures liquidation. This shows that sentiment was extremely bullish with the majority of margin investors being leveraged long. The previous record for liquidations was $5.8 billion on February 23rd. Of Sunday’s sell-off, 9.3 billion, or 90% of the liquidations, were the result of margin calls. That’s a clear rebalance of a market in one fell swoop!
“On Binance, the drop was so bad that you were able to pick up long-term futures at prices well below the spot market,” Adam Cochran, a partner with Cinneamhain Venture, wrote in a tweet. “While spot [markets] dipped to $51,000, futures were trading in the low $40,000.”
The situation has since normalized. To be fair, the weekend’s traditional low volume amplified the move. “The fact that we’ve seen strong buying interest near the psychological $50,000 mark should be a relief for bitcoin bulls following the weekend plunge,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank
While the price closed for the first time in several months slightly below the 50-day moving average, an indicator of near-term uncertainty, there is still critically important support at $52,000/$53,000 that should keep the uptrend going, which is the price needed to maintain the $1 trillion total capitalization. “This revisit of lower price has created incredibly strong price validation for Bitcoin around the $1 trillion market cap. 14% of the supply last moved above the $1 trillion cap,” wrote statistician Willy Woo. “This is a key line in the sand imprinted into BTC’s price discovery, an area of immense support.”
Among altcoins, it is ETH that continues to impress. The ratio of one ETH to one bitcoin currently exceeds 0.043, while bitcoin is about $8,000 away from its all-time high at the time of writing, ETH is only 5% away from matching its all-time high. The Rivemont Crypto Fund is obviously not on the sidelines watching this trend. The majority of the fund’s capital is in fact now exposed to ETH rather than bitcoin.
Rivemont Investments, manager of the Rivemont Crypto Fund.
The presented information is as of April 21st, 2021, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
