Citi maintains faith in crypto-linked equities

Citigroup’s global research team is sticking with crypto-linked equities even after bitcoin’s sharp year-end volatility, arguing that listed companies tied to digital assets are increasingly driven by cash flows, regulation and market share rather than the spot price of the world’s largest token.

The bank continues to flag Circle as its preferred exposure in the sector, while keeping a constructive view on Bullish and Coinbase, according to analysts familiar with its latest positioning. The stance comes as bitcoin endured heavy swings in December, pressured by profit-taking, shifting expectations on interest rates and lingering uncertainty over the pace of institutional inflows.

Citi’s thesis rests on a separation it believes is taking hold between crypto prices and the underlying businesses that service the ecosystem. While token markets remain volatile, the bank argues that exchanges, stablecoin issuers and market-infrastructure providers are benefiting from higher trading volumes, expanding use cases and a clearer regulatory perimeter in major jurisdictions.

At the centre of Citi’s preference list is Circle, the issuer of the USDC stablecoin. Analysts see Circle as a beneficiary of tighter oversight of dollar-pegged tokens, which has raised compliance costs for smaller players and strengthened the position of firms with established governance, reserve transparency and banking relationships. USDC continues to be used widely for settlement, decentralised finance applications and cross-border payments, supporting transaction-driven revenue streams that are less sensitive to bitcoin’s price.

Citi’s analysts also highlight Circle’s growing role in traditional finance rails, noting that banks and payment firms are increasingly experimenting with tokenised cash for faster settlement. That trend, they argue, could anchor stablecoin demand even during periods when speculative trading in cryptocurrencies cools.

Alongside Circle, Citi retains a bullish outlook on Bullish, the digital asset exchange backed by Block. one and other investors. Bullish has been expanding its derivatives and institutional offerings, areas that tend to generate steadier fee income. Citi views the exchange’s technology-driven model and focus on professional traders as a hedge against the retail-led boom-and-bust cycles that have historically defined crypto markets.

The third pillar of Citi’s crypto-equity view is Coinbase, the largest listed cryptocurrency exchange by market capitalisation. Despite periodic pressure on its share price linked to regulatory headlines and bitcoin swings, Citi argues that Coinbase’s balance sheet strength, custody business and role as a gateway for institutional investors position it well for the next phase of market development.

Coinbase has reported stronger engagement from asset managers, corporates and high-net-worth clients following the launch of spot bitcoin exchange-traded funds in the United States earlier in the year. Citi’s analysts say that trend underpins trading, custody and financing revenues that are more resilient than in previous cycles.

The bank’s continued confidence contrasts with scepticism from some corners of Wall Street, where strategists warn that crypto-linked stocks remain proxies for token prices during periods of stress. Bitcoin’s late-year slide, triggered by leveraged positions being unwound and uncertainty over the timing of monetary easing, revived concerns about whether equities in the sector can truly decouple from the underlying assets.

Citi counters that the sector has matured since earlier boom-and-bust episodes. Regulatory clarity has improved in several markets, exchanges have strengthened compliance frameworks, and listed companies are under closer scrutiny from investors focused on earnings quality and cost discipline. The bank points to cost-cutting measures, diversification into subscriptions and services, and the build-out of institutional products as evidence of a more durable business model.

Macroeconomic factors still matter. Higher interest rates affect valuations, and sudden drops in token prices can hit sentiment and volumes. Yet Citi’s research suggests that the sensitivity of crypto-linked equities to bitcoin has been easing, particularly for firms with multiple revenue lines and strong liquidity positions.