If awarded a wooden spoon, Rex would be a candidate for our calls on cryptocurrencies and crypto-adjacent stocks.
Take Coinbase, for example. The crypto-trading platform was a financial dark horse in 2023, with shares up nearly 400%, outpacing tech companies and even Nvidia’s 249% rise.
At the beginning of 2024, Rex was skeptical that its strong performance would continue. The U.S. Securities and Exchange Commission gave the green light to 11 Bitcoin ETFs in January, but the long-term benefits for Coinbase were less clear.
The Spot Bitcoin ETF provides investors with exposure to the world’s largest cryptocurrency without directly owning it. Coinbase stood to benefit by acting as a custodian for the Bitcoin held by these funds. However, the profits from this activity are thin, especially when compared to trading. In the long run, Rex thought the success of spot Bitcoin ETFs could make trading physical Bitcoin less attractive. This could hurt Coinbase’s Bitcoin trading volume and offset profits from its custody business.
We could not have predicted the Trump effect and the magnitude of the impact his election victory would have on the crypto world. Bitcoin’s price has risen 40% since Nov. 5, briefly topping the $100,000 mark in December amid excitement over a predicted era of industry deregulation. Coinbase stock is up 36% since the election and is up nearly 70% this year. Robinhood Markets, which also offers crypto trading, is up 216% this year, while MicroStrategy, a software provider turned Bitcoin investor, has soared nearly 400%.
Predictions regarding older payment technologies Mastercard and Visa fared much better. Card transaction fees have been a long-standing source of tension between merchants and payment processors in the United States. Visa and Mastercard, the world’s two largest card networks, have come under fire from regulators over their dominant positions.
Rex said earlier this year that investors can rest easy. Both companies’ high-margin business models will remain intact. In fact, both companies’ stock prices have risen by about a quarter this year and are trading at record highs. That’s despite the U.S. Department of Justice filing an antitrust lawsuit against Visa and a federal judge rejecting a settlement between the companies and retailers over swipe fees.
While the former threat is likely to disappear under the Trump administration, the latter threat (which would force both companies to return to the negotiating table with distributors) may take time to resolve. Incidentally, the settlement announced in March was intended to resolve most of the litigation that began in 2005.
pan.yuk@ft.com
