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Coinbase share price spikes after BlackRock deal

·3 min read
Brian Armstrong, CEO and Co-Founder of Coinbase, speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, U.S., May 2, 2022.  REUTERS/David Swanson
Brian Armstrong, CEO and co-founder of Coinbase. Photograph: Reuters/David Swanson

Coinbase shares have soared by over 75% from a 52-week low after the crypto exchange announced a partnership with BlackRock (BLK) that will allow institutional clients to buy bitcoin. However, the world's second-largest cryptocurrency exchange is expected to show a sharp drop in revenue and earnings when it reports second-quarter results on Tuesday.

The crypto-market crash that began in May with the dramatic collapse of the terra/Luna algorithmic stablecoin will have taken a heavy toll on the US-based trading platform.

Coinbase (COIN) is listed on Nasdaq (^IXIC), and analysts see the quarterly loss widening to $2.47 (£2.04) per share, from $1.98 in the quarter before.

The pessimistic expectations for Coinbase's quarterly results have not dinted a recent rally in the crypto-exchanges share price.

Read more: Crypto live prices

Ahead of today's earnings report the second largest cryptocurrency exchange continued a rally that started in earnest at the end of July when the share price had slumped to $49.

Shares in COIN fell after the opening bell in New York today, down 8.47% in 24 hours, and as of the time of writing they stand at $89.72 per share.

BlackRock is the world’s largest asset manager, and the fact that the giant of institutional finance is interested in bitcoin has not caused a ripple of optimism to spread through the cryptocurrency sector.

A full reverse of the current bearish movement of the crypto market has yet to materialise.

BlackRock's partnership with Coinbase (COIN) furthers the recognition that bitcoin is a legitimate asset class to go along with equities, fixed income, commodities and currencies.

In an online statement, BlackRock said that its clients that use its portfolio management platform, called Aladdin, will be offered crypto services with Coinbase Prime.

Watch: The Crypto Mile: Episode 6 - Ethereum insider reveals consequences of 'the merge'

Coinbase Prime is an exchange platform specifically for institutions and allows trade execution for 200 assets, and allows institutions to stake cryptocurrencies for annual or monthly yields.

Coinbase Prime provides institutions with an end-to-end staking infrastructure for cryptocurrencies such as ethereum.

With Ethereum (ETH-USD) 'merging' to a proof of stake validation method in mid-September, institutions will be able to become involved in the process of setting up staking nodes and gain access to the staking rewards that will begin to accumulate.

Read more: Can ethereum merge make ether the next bitcoin?

This is a significant partnership, not least because BlackRock is one of the biggest asset management firms in the world.

The financial institution is the largest asset manager in the world with more than $8 trillion under management.

Bitcoin will be initially available to BlackRock clients, but other digital assets could be rolled out in the future.

BlackRock's global head of strategic ecosystem partnerships, Joseph Chalom, said: "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."

Read more: Ethereum supply to shrink after 'Merge' upgrade, says Vitalik Buterin

Referring to BlackRock's into the cryptocurrency ecosystem, Marcus Sotiriou, analyst at GlobalBlock, said: "This is a huge milestone for the crypto space, as it demonstrates the demand from BlackRock’s clients and institutional investors to access Bitcoin. I think this could be seen as a green light by other funds to enter the crypto space too."

Today bitcoin (USD-BTC) continues a buoyant start to the week, the world's preeminent cryptocurrency is up 2.2% in the last week to stand at $23,850.

The second largest cryptocurrency by market capitalisation, ethereum (ETH-USD), is up 8.6% in one week, pricing in at $1,781 today.

Watch: The Crypto Mile weekly update: Coinbase SEC probe and crypto rally after Fed Rate hike