On Thursday, Bitcoin-adjacent stocks surged, as the pioneer crypto token reclaimed the $45,000 mark once more.
This helped it erase the losses it had incurred after the approval of various spot Bitcoin ETFs in the previous month.
The rise
Public software firm MicroStrategy recorded gains of 12%, as its share price rose to $569, with the company holding 190,000 BTC tokens.
Meanwhile, there was a 7.7% increase in the share price of crypto exchange Coinbase (COIN), as it made a recovery from a decline recorded earlier in the week and was trading at $131.
Likewise, there was also a surge in the share prices of bitcoin mining companies, such as Marathon Digital (MARA) and CleanSpark (CLSK).
The latter recorded gains of 16% on Thursday alone, while the latter has seen its value surge 24% since last week.
Historically, public crypto companies have traded just like Bitcoin’s extra volatile proxies, which made these market movements quite unexpected.
However, their performance is undoubtedly a positive indicator because it shows that these companies will keep pace with Bitcoin, even when they are facing competition from the Bitcoin spot ETFs that are now public.
Spot ETFs
Once the US SEC granted approval to spot Bitcoin ETF applications, they began trading the next day on January 11th, including those of Fidelity and BlackRock.
These have been designed to track the price of Bitcoin by directly using BTC to back their shares. In terms of investment, it is not very different from when people buy Bitcoin on an exchange.
The only difference is that the process has the same familiarity of using your brokerage or bank account for purchasing stocks.
Moreover, it is also the only option that some companies have when they want to gain Bitcoin exposure because their internal charter prohibits them from purchasing anything not within an ETF or equity wrapper.
This means that they give fierce competition to Bitcoin firms that were the next best thing to corporate investors until now.
The advantages
Of course, there are still some advantages of Bitcoin companies. MicroStrategy recently rebranded itself as a Bitcoin development firm.
In fact, it claimed that it offers a unique proposition over spot Bitcoin ETFs because it generates cash via operations, develops software, and leverages capital markets.
The second largest asset manager in the world after BlackRock, Vanguard prevents its clients from investing in Bitcoin spot ETFs.
However, interestingly enough, the company itself is a prominent owner of MSTR and Bitcoin miners. Its investment philosophy is to favor businesses that have real cash flows instead of commodities like BTC.
In 2017, the late founder of Vanguard, John Bogle said that Bitcoin needed to be avoided like the plague.
He had stated that there was no underlying rate of return attributable to Bitcoin. He said that stocks have dividends and earnings and bonds have an interest coupon, but Bitcoin does not have anything.