In a recent surge in cryptocurrency markets, Bitcoin (BTC) hit a new all-time high (ATH) of $69,300 on Tuesday, leading to a remarkable rebound in the convertible bond issued by US-based crypto exchange company Coinbase.
Following the recent surge in cryptocurrency markets, the Coinbase bond faced a decline in demand when the underlying stock slumped due to rising global interest rates, but now it bounces back, reaching a two-year high.
Convertible Bond Reaches Two-Year High Amid Digital Asset Price Recovery
Coinbase’s convertible bond, initially sold during the pandemic amidst soaring demand for tech and growth stocks, bounces back and has reached a two-year high. The recovery in digital asset prices has played a significant role in this resurgence.
According to Bloomberg, the rebound in Coinbase’s bond value reflects a broader resurgence in the appetite for convertible bonds, particularly in the artificial intelligence (AI) sector. Some firms in the AI sector have successfully issued bonds with no coupon, signalling a strong investor demand for these financial instruments.
MicroStrategy, led by Michael Saylor, and Coinbase have been at the forefront of crypto-backed bond offerings. Coinbase’s convertible bond, initially sold with a 0.5% coupon, faced a decline in demand during a stock slump triggered by rising global interest rates. However, the recent cryptocurrency rally has spurred a recovery, nearly doubling the bond’s value since its November 2022 trough.
DigitalOcean’s Bonds Reach Highest Level Since January 2022
DigitalOcean, another crypto-related company, currently sees its bonds trading at 83 cents, marking the highest level since January 2022.
Asset manager Grayscale has requested the US Securities and Exchange Commission (SEC) to permit options trading on spot Bitcoin exchange-traded funds (ETFs). The SEC, however, has extended the decision timeline, prompting Grayscale to emphasize the necessity for exchange-listed options on GBTC and other spot Bitcoin ETFs.
Grayscale Challenges SEC’s Decision, Highlighting Inconsistency
Grayscale CEO Michael Sonnenshein expressed concern in a letter to the SEC, emphasizing that rejecting options on GBTC would “unfairly discriminate” against shareholders. Sonnenshein pointed out the inconsistency in treating options on derivatives differently from those on the underlying asset, referencing the SEC’s prior approval of options on ETFs linked to Bitcoin futures.
Despite Grayscale’s plea, the SEC extended the period to decide on options trading for spot Bitcoin ETFs. The SEC has set April 24, 2024, as the deadline to either approve, disapprove, or initiate proceedings for the proposed rule change.
In response to the SEC’s extension, Grayscale emphasized that if investing in options for shares of products holding derivatives is acceptable, then investing in options for shares of products holding the asset itself should be equally acceptable. Grayscale’s response highlights the need for consistency and regulatory clarity in cryptocurrency investment products.
Recent Cryptocurrency Developments
In the fast-paced world of cryptocurrency, recent events have triggered significant changes, and it’s essential to break them down for a clearer understanding.
Firstly, the surge in cryptocurrency markets, especially the record-breaking high for Bitcoin at $69,300, has sparked a positive rebound for Coinbase. The convertible bond issued by Coinbase, essentially a financial tool that can turn into company shares, bounces back and has hit a two-year high. This is good news for Coinbase, especially considering the challenges it faced during the pandemic.
Two notable players, MicroStrategy and DigitalOcean, are making headlines. MicroStrategy, led by Michael Saylor, successfully sold a whopping $700 million convertible bond to fund more Bitcoin purchases. DigitalOcean, another company in the crypto space, has seen its bonds reach the highest level since January 2022, indicating a positive trend in the market. Grayscale, an asset manager, has asked the SEC to allow options trading on Bitcoin exchange-traded funds (ETFs). However, the SEC decided to take more time to make this decision, setting a deadline for April 24, 2024.
Also Read: Mark Cuban Predicts Bitcoin Demand to Outpace Supply, Fuels Price Surge Anticipation.
