How sustainable is the upswing in the crypto market?
The March correction in tech stocks like Tesla suggests that the crypto market is also likely to come under pressure. So far, however, that hasn’t been the case. Why Coinbase’s company valuation is sporting, cryptocurrency staking is preventing a sell-off and summer could put an end to stock market fever.
After an impressive rally, many tech stocks have had to make a major setback since the beginning of February. Measured against the price increases of recent months, this is an overdue consolidation that can be Bitcoin Bank described as healthy in view of rising US yields. Compared to the tech stocks in the S&P500, the crypto market is doing surprisingly well. Although the last half of February was also marked by a small damper, the prices of all cryptocurrencies have been rising again since then.
Where does the strength in the crypto market come from?
DeFi and NFT projects in particular are still going through the roof and continue to attract fresh capital. This not only indicates high momentum and demand in the crypto market relative to other markets, but also suggests greater independence from macroeconomic conditions, see S&P 500.
Supported by the market momentum, some crypto players on the scene want to join the big players, ergo traditional stocks. Accordingly, IPOs are also on the agenda. First and foremost, the crypto exchange Coinbase is making a name for itself, whose IPO could reach into the triple-digit billion range. Competitor Kraken has also announced that it is toying with an IPO.
IPOs as a barometer of sentiment
The time couldn’t be better for the former crypto start-ups to be able to push through high (and cheeky) valuations. Without wanting to diminish Coinbase’s success, one has to ask whether a valuation of 100 billion US dollars, which is currently being discussed, would be justified even without the current stock market mania. Especially since the business model of a crypto broker is comparatively easy to replace and, for example, does not profit as much from a network effect as the internet platforms from Silicon Valley. In the long term, crypto brokers will also have to compete with traditional banks and stock exchanges. Just for comparison: In May 2012, Facebook had the largest technology IPO of all time and was „only“ valued at 104 billion US dollars at that time.