Coinbase stock soared on Thursday after the crypto exchange announced a partnership with BlackRock that will enable its institutional clients to purchase bitcoin.
Coinbase’s stock recently increased by 15%. Earlier in the day, they had risen by as much as 40%.
Clients of BlackRock’s portfolio management platform for institutional investors, Aladdin, will be able to access services in the company’s Prime offering, according to the company’s blog. Coinbase will offer cryptocurrency trading, custody, prime brokerage, and reporting services. With more than $8 trillion under management, BlackRock is the world’s largest asset manager.
According to alternative data provider Quiver Quantitative, the ticker COIN was also one of the most mentioned names on Reddit’s WallStreetBets on Thursday, surpassing GameStop’s popularity in the online forum.
“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, BlackRock’s global head of strategic ecosystem partnerships. They will be able to “manage their bitcoin exposures directly in their existing portfolio management and trading workflows” as a result of the collaboration.
That enthusiasm is a guiding light for the crypto community. This week alone, the industry has seen a slew of hacks and breaches, including attacks on Solana and Nomad. Crypto has fallen in line with the broader sell-off in risk assets, and it has been hampered further by the financial contagion caused by the Terra collapse in the spring. Many investors believe that institutional adoption is critical to increasing the maturity, stability, and price of bitcoin, as well as the overall crypto market.
Analysts are baffled as to why Coinbase shares have been on a tear recently. On Wednesday, the stock increased by 20%. Through Wednesday’s close, the shares were still down nearly 70% for 2022.
The unusual increase in Coinbase this week could be attributed to investors betting against the stock scrambling to cover their short positions, a phenomenon known as a short squeeze. According to FactSet, more than 22% of Coinbase’s available for trading shares are sold short. As a result, as the stock has risen, these investors have been forced to repurchase the stock in order to cover their losses, further fueling the gains.
Despite the market’s doom and Coinbase’s share price decline, Citi Thursday called it the “fizzle before the sizzle” and said it expects a stock reversal in the next three months.