Summary Bullish (BLSH) faces significant headwinds as Bitcoin's decline erodes its balance sheet and trading volumes, prompting a reiterated sell rating. BLSH's Q3 results revealed a 29% year-over-year drop in monthly active users and sequential declines in trading volume, despite a U.S. market launch. A large portion of BLSH's value is tied to its crypto holdings, with recent Bitcoin and Ethereum price drops causing substantial balance sheet losses. My preferred crypto/blockchain investments are Circle (CRCL) and Figure Technologies (FIGR), both trading at cheaper EBITDA multiples than Bullish. With all the focus planted on year end stock market volatility, investors should also pay close attention to the warning signals being flashed in the crypto markets. For me, the eroding price of Bitcoin isn’t just asset-specific fear about the so-called four year halving cycle, but a general risk-off attitude that is entering into the mainstream as we head into 2026. Bitcoin’s sharp drop has taken down a number of crypto stocks, whether or not they are directly impacted by the decline of BTC. Put Bullish ( BLSH ) in the “heavily impacted” category. The exchange operator will be hit by trading volumes plus a devaluation of its own balance sheet. Already down more than 50% from post IPO highs around $90, Bullish has more to lose. Data by YCharts I last wrote a sell article on Bullish in October, when the stock was trading in the mid $50s. The stock’s collapse since then has not induced me to buy the dip just yet, as I think the loss of value is commensurate to the company’s own sustained losses on its crypto holdings, plus the slowdown in its trading and CoinDesk businesses. I’m reiterating my sell rating here. Poor indicators through Q3 and beyond Let’s first start with a discussion of how Bullish’s core business has weakened before diving into its balance sheet erosion as well. Bullish just reported Q3 results that beat out Street expectations on growth, but overall showed worrying trends. Take a look at the key trended metrics in the chart below: Bullish key metrics (Bullish Q3 earnings deck) As a reminder, Bullish has two principal sources of revenue. It operates CoinDesk.com, which is a crypto news and market cap tracking site. It also opened a new subscription-only research service, akin to a paid equity research platform for the crypto industry. We note as shown in the chart above that Bullish’s monthly active user counts fell -29% y/y to 2.7 million; which also reflects a sequential loss of 0.2 million subscribers. This is a critical source of subscription and advertising revenue that stabilizes Bullish’s more choppy trading platform. On the other and more prominent side of the house, trading, we note that Bullish has executed its long awaited entry into the U.S. market on October 31, which happened after the close of Q3. Like other exchanges, Bullish reports its trading statistics on a monthly basis. Spot trading volumes in October nearly doubled month on month to $77.5 billion ahead of the U.S. launch. Though Bullish only guides to subscription and services revenue and doesn’t attempt to guess at trading volumes, we do expect a sharp surge in Q4. Bullish October trading trends (Bullish October metrics release) Speaking to the launch trends on the Q3 earnings call, CEO Tom Farley noted as follows: Our exchange launched in full and without risk caps at the tail end of October. In just over 2 weeks, we've already traded well over $1 billion of volume. And as of today, we have approximately $1 billion in open interest. Our best day was yesterday, where we traded $240 million, about 4% market share by our definition. I'm really excited by the traction we've attained right out of the gate, and I expect it to become a significant contributor to our financial performance going forward. Look, I've been involved with a lot of these derivatives launches over the years, including very successful ones and a few that I rather not discuss. This one has all the hallmarks of a big winner.” That said: the expectations of the launch were already baked into the share price. Exclude the impacts of the U.S. launch, and trends might be much worse. In Q3 (through the month of September), I’m concerned about the fact that average trading volume of $1.42 billion fell -21% sequentially versus Q2. We might get a temporary lift in Q4 when U.S. trading kicks in, but once the U.S. launch is fully comped, we may start to get a feel for “organic” growth which may be a lot weaker. We note that Bullish faces no shortage of competition, with much larger-name brokerages like Robinhood ( HOOD ), Coinbase ( COIN ), and Binance dominant in the U.S. Balance sheet devaluation To some extent, a lot of the value in Bullish was also in its crypto treasury strategy, and its fortunes rose and wavered with the health of the crypto markets. Unfortunately, the recent slide in Bitcoin prices does a lot of damage to Bullish. Relative to peaks above $125k, Bitcoin has sank ~30%. There has been a big splash of recent headlines about the driving causes behind this that we won’t rehash here, but the most prominent is the fact that Bitcoin prices have typically peaked in four year cycles, and investors are fearing another repeat of 2022, where BTC fell from above $60k at 2021 highs to briefly dip below sub-$20k. Bullish net assets (Bullish Q3 earnings deck) As shown in the chart above Bullish reported $3.49 billion of net liquid assets on its most recent balance sheet, which is a substantial chunk of the company's current $5.89 billion market cap. To a large extent, an investment into Bullish is necessarily tied to the value of its crypto portfolio. The snapshot below, meanwhile, showcases the company's principal holdings. Of its $4.35 billion in digital asset balances (excluding debt, which is what its net liquid assets represent), $2.76 billion is invested into Bitcoin, and $89 million into Ethereum at market prices of $113,074 and $4,160 respectively. Bullish crypto valuation detail (Bullish Q3 earnings deck) As of the time of writing, relative to Bullish's mark-to-market balance sheet as of Q3, the BTC on Bullish's balance sheet has fallen -23% to $113.1k, while ETH has taken an even sharper -30% tumble to $2,930. This equates to a loss of $634 million on Bitcoin, and $27 million on Ethereum. The fall in crypto markets may have more adverse impacts beyond simply devaluating Bullish's balance sheet. Fewer investors may be trading in and out of Bitcoin as it falls, especially given the "HODL" mantra among many crypto enthusiasts, which may impact Bullish's trading volumes amid the U.S. launch. Valuation and key takeaways Despite all of its headwinds plus its recent correction, Bullish doesn't necessarily trade at a discount to peers, either. As shown in the chart below, Bullish sits at a ~70x forward adjusted EBITDA multiple, which is well ahead of Coinbase ( COIN ) at ~21x forward adjusted EBITDA. Data by YCharts I think it's important for investors to allocate some direct exposure to crypto (particularly BTC) in our portfolios, as well as to invest in companies that are innovating in payments and the blockchain. But my preferred investments in this space are Circle ( CRCL ), which is the sponsor behind #2 stablecoin USDC, and Figure Technologies ( FIGR ), which operates a blockchain lending platform that can tokenize and collateralize real-world assets like real estate to originate loans, principally HELOCs. Both trade at cheaper multiples than Bullish, and don't have the same exposure to falling crypto prices (especially Circle, where USDC price doesn't fluctuate at all, but whose yields are tied to the Fed's decisions on short-term interest rates). Resist the temptation to catch a falling knife here.
