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Crypto

Crypto Mainstream Adoption Rises, Canaccord Ups Galaxy Digital Target to C$23

Canaccord raises Galaxy Digital price target to C$23 amid increased mainstream adoption and strong institutional exposure.

6/10, 10:17 EDT
Bitcoin / U.S. dollar
Bitcoin / US Dollar
Core Scientific, Inc.
ethereum USD
GameStop Corporation
Robinhood Markets, Inc.
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Key Takeaway

  • Canaccord Genuity raised Galaxy Digital's (GLXY) price target to C$23 from C$17, citing strong institutional exposure and good business execution.
  • Galaxy benefits from mainstream adoption of digital assets, including the SEC's approval of eight ether spot ETFs and partnerships with Inveco, DWS, and Itau.
  • Additional tailwinds include Robinhood’s acquisition of Bitstamp and potential gains from its Helios mining facility amid AI-driven energy demand.

Galaxy Digital's Strategic Position

Galaxy Digital (GLXY) is poised to benefit from the ongoing structural adoption of digital assets, according to a recent research report by Canaccord Genuity. The brokerage firm has raised its price target for Galaxy Digital to C$23 from C$17, maintaining a buy rating on the stock. The shares closed at C$16.25 on Friday. Analysts led by Joseph Vafi cited several factors for the increased price target, including the firm's strong institutional exposure and effective business execution. "With digital assets hovering near all-time highs, some incremental logjam break on the regulatory front, good business execution by GLXY and some rerate up on a sum-of-the-parts (SOTP) valuation, we are boosting our price target," the report stated.

The report also highlighted a "slow but steady shift toward mainstream adoption of digital assets" in recent months, noting the unexpected initial approval of eight ether spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) last month. Galaxy Digital has a strong foothold in the ETF market, having partnered with leading players like Inveco, DWS, and Itau. Additionally, Galaxy's role as the exclusive financial advisor to Robinhood in its recent agreement to buy Bitstamp underscores the firm's investment banking capabilities. Galaxy also owns the Helios mining facility in west Texas, which could see appreciation if energy-hungry artificial intelligence companies continue to seek out deals with bitcoin miners, as evidenced by the recent approach from Core Scientific (CORZ).

Market Volatility and Liquidation Events

Bitcoin (BTC) and ether (ETH) experienced little change over the weekend following a $400 million leverage flush out on Friday, which dampened market momentum. Analysts at Presto Research expect market volatility to return in the week ahead, driven by macroeconomic catalysts such as the Consumer Price Index (CPI) release on Wednesday, the Federal Open Market Committee (FOMC) meeting on Thursday, and a speech by Janet Yellen on Friday. The record leverage build-up on bitcoin futures led to a sharp decline in BTC prices following the release of stronger-than-expected non-farm payrolls (NFP) figures. The US economy added 275,000 jobs compared to the expected 185,000, causing BTC to fall from $71,000 to $69,000.

The slide in meme stock GameStop (GME) also weighed on riskier assets such as alternative tokens and meme coins, with major memes dogecoin (DOGE) and shiba inu (SHIB) losing as much as 10%. Since Friday, open interest, or the number of unsettled futures contracts across various tokens, slid from $99 billion to $60 billion, indicating that traders significantly pared bets. Trading volumes fell 10% in the past 24 hours, according to Coinglass data. As of early European hours on Monday, BTC traded just over $69,400, while ETH traded around $3,660. Solana (SOL) and XRP showed slight losses, and BNB Chain’s BNB tokens lost 5.5% as traders likely took profits following a rise to a lifetime peak of over $710 last week. Cardano (ADA) was slightly up on Monday following confirmation of a technical event that could affect the fundamentals of the network and its token.

Buying the Dip Opportunity

The recent price swoon in Bitcoin (BTC) and ether (ETH) following Friday's hotter-than-expected U.S. jobs data presents a good opportunity to buy the dip, according to QCP Capital, a Singapore-based trading firm. The non-farm payrolls data showed the U.S. economy added 272,000 jobs in May, significantly more than the 185,000 estimated and well ahead of April's downwardly revised 165,000. While the jobless rate ticked higher to 4%, average hourly earnings rose 0.4% month-on-month, above the expectation of a 0.3% rise.

Markets immediately trimmed the probability of a 25 basis-point Federal Reserve rate cut in September to 60% from 85%, sending risk assets, including cryptocurrencies, lower. JPMorgan and Citi scrapped forecasts for a Fed rate cut in July, while some observers put rate increases or additional liquidity tightening back on the agenda. Bitcoin, which looked primed for a breakout above $72,000, fell almost 3% to $68,400. Ether and the CoinDesk 20 index followed Bitcoin's lead. QCP Capital noted that the Fed will have trouble keeping rates elevated while other central banks reduce borrowing costs. "Strong upside surprised on NFP (272K vs 182k), higher payrolls came with higher unemployment (3.9% to 4.0%). It was confusing enough to trigger a risk-off ahead of U.S. inflation numbers and FOMC," the firm said in a market update.

QCP Capital believes this is a good opportunity to buy the dip as markets will increasingly price in at least one Fed rate cut from here. "It will be difficult for the U.S. to ignore as the rest of the world continues to cut rates," the firm said. The European Central Bank and the Bank of Canada cut rates last week, leading the Group of Seven (G7) to start a so-called easing cycle. According to MacroMicro, the number of central banks whose most recent moves have been rate cuts has increased this year. Other central banks, including the Fed, may soon join the fray in tit-for-tat rate reductions as a part of a strategy to manage their burgeoning public debts, inadvertently boosting demand for alternative investments like cryptocurrencies. "Our desk saw bullish flows on this dip, both sellers of aggressive puts and buyers of call spreads, especially in BTC," QCP said.

Street Views

  • Joseph Vafi, Canaccord Genuity (Bullish on Galaxy Digital):

    "With digital assets hovering near all-time highs, some incremental logjam break on the regulatory front, good business execution by GLXY and some rerate up on a sum-of-the-parts (SOTP) valuation, we are boosting our price target."