Bitcoin BTC/USD is down about 10% year-to-date, but several crypto-related stocks have fallen significantly further.
Needham & Company's John Todaro offered an explanation for the disconnection Tuesday on CNBC's "TechCheck."
"Trading volume, which is generally correlated with volatility, has actually been quite a bit muted," Todaro said.
Bitcoin has been less volatile as of late than it has been historically. As trading volumes decline, companies like Coinbase Global COIN are adversely impacted while the underlying crypto assets generally bounce around a trading range, he explained.
"That's why you are starting to see some underperformance in the stocks correlated to the space."
Todaro said some of the volume decline in crypto assets can be attributed to the U.S. tax season. Tuesday's rally follows the closing of the federal tax filing deadline, he added.
"That's likely why we are seeing a little bit of a rally here, I think certainly on the retail side, after the tax liabilities were paid, folks are looking to put a little bit more money back into crypto assets," Todaro said.
What's Next: The next catalyst for crypto could come from an easing of geopolitical tensions or a taming of inflation, he said.
"You've seen some momentum fade. I think if that momentum can start coming back on the retail side — whether it's new innovative projects that retail can get excited about, any new NFTs that can come about, any advances there — you should start to see some more folks step in and start bidding."
Todaro told CNBC that the crypto market may be nearing a bottom. He suggested that people will start looking for places to put money to work, as he sees several buying opportunities.
Needham has a Buy rating on Coinbase, as well as CompoSecure Inc CMPO, which makes the Arculus cold storage wallet.
"I think both of those are attractive companies, especially at these valuation levels. These companies are down to three, four times revenue, so I think these are quite discounted here," Todaro said.
$BTC Price Action: According to data from Benzinga Pro, Bitcoin was up 5.67% over a 24-hour period at $41,492 at press time.
Photo: TheDigitalArtist from Pixabay.
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