Bitcoin was under pressure again Tuesday, extending a decline that stretched over the weekend.
The best-known cryptocurrency has fallen from more than $59,000 per coin to below $44,000 in less than two weeks. Tesla CEO Elon Musk triggered the most recent sell-off after he reversed a decision to allow bitcoin as payment for cars, pointing to the environmental impact of bitcoin mining.
Mark Tepper, president of Strategic Wealth Partners, told CNBC that recent moves inspired a so-called pair trade in the crypto space — buying a long position in one stock and selling another.
“I would buy Silvergate Capital and I would sell Coinbase and here’s why. Remember years ago when there were stock brokers. … They’re basically extinct today because over time the stock brokers were replaced with investment advisors who got paid a recurring asset under management fee. Coinbase is the stockbroker of cryptos,” Tepper told CNBC’s “Trading Nation” on Monday.
He noted that Coinbase gets paid a commission on every transaction and predicts it will get commoditized similar to no-fee industry changes for brokers such as TD Ameritrade. Instead, he’s more bullish on Silvergate’s business model.
“Silvergate makes money off the money [such as interest on loans]. … Both companies are going to grow at about 40%, but Silvergate trades at about less than half the multiple of Coinbase,” said Tepper.
Coinbase and Silvergate have underperformed in the past month — Coinbase is down 27%, falling since its mid-April debut, while Silvergate has fallen 25%. Shares of Silvergate were rallying on Tuesday, though, up 10%.
Prompted for another pair trade in tech and high-growth stocks, Oppenheimer‘s head of technical analysis Ari Wald looked to the semiconductor space.
“For our long/short hedge fund clients, we’re recommending to buy Broadcom against a short position in Xilinx,” Wald said during the same interview. “Both have corrected into their support at their March low. That’s where the similarities end.”
Wald says Broadcom holding above its 200-day moving average looks to be a sign of relative strength and points to the potential for a larger breakout. He expects Broadcom to resume leadership over Xilinx in the next few weeks.
Disclosure: Strategic Wealth Partners holds Silvergate.
