Bitcoin's Surge Boosts Coinbase Bond, SEC Delays Decision on Crypto ETF Options

The crypto market's recent uptick, led by Bitcoin reaching a record $69,300, has positively impacted a bond from the US crypto exchange Coinbase. This bond, sold initially during the tech stock boom in the pandemic, hit a two-year peak due to the cryptocurrency surge. Bloomberg reports that this reflects a wider interest in convertible bonds, especially in the AI sector, where companies have issued bonds without any interest rates. MicroStrategy and Coinbase are at the forefront of issuing crypto-backed bonds. Coinbase's bond, which can be turned into shares, started with a low 0.5% interest rate. Its value dropped as global interest rates rose and Coinbase's stock fell. However, the bond's price has rebounded to 102.625 cents on the dollar, a two-year high, thanks to the crypto market rally, pushing its yield to negative. This recovery is part of a broader trend where convertible bonds are regaining popularity among investors.

AI companies have been able to issue bonds without any coupon, showing strong market demand for these financial tools. In the crypto world, MicroStrategy raised funds through a $700 million bond with a 0.625% coupon to buy more Bitcoin. DigitalOcean's bonds are also performing well, trading at 83 cents, the highest since January 2022. Grayscale's ETF options delay by the SEC is another key development. The asset manager had requested the SEC to allow options trading on Bitcoin ETFs, aiming for greater investor accessibility. The SEC has pushed back its decision deadline to April 24, 2024, to further review the proposal. Grayscale argues that not allowing options on its Bitcoin Trust would be unfair, especially since options on Bitcoin futures ETFs were approved. They stress the inconsistency in the SEC's approach to derivative and underlying asset options, underlining the need for clear cryptocurrency regulation. In summary, the crypto market's growth has not only lifted Coinbase's bond but also highlighted investor interest in convertible bonds and the need for regulatory clarity in cryptocurrency investments, especially concerning ETF options.