Rumors of a “crypto winter” are intensifying, with shares of companies exposed to cryptocurrencies caught up in the carnage.
The price of Bitcoin, the proxy of the cryptocurrency space, is down more than 50% this year, exceeding the volatility that even crypto enthusiasts have come to tolerate. Amid the drawdown, few were willing to acknowledge that the asset class is entering a so-called crypto winter, or an extended period of low prices. That changed this week after crypto lender Celsius halted account withdrawals and cryptocurrency trading.
(ticker: COIN) announced that it would lay off nearly a fifth of its staff.
But it’s not just cryptocurrencies that are seeing their prices drop, many of the proxy stocks for crypto investment are also in decline, regardless of their level of exposure.
Among the publicly traded companies most exposed to crypto markets is Coinbase. Stocks are down 80% this year, far outpacing Bitcoin’s decline. This should not come as a total surprise to investors, as Coinbase has stated that cryptocurrency volatility would affect its finances, meaning it would be profitable in good times and face losses in bad.
But Wall Street has a grudge against Coinbase: Analysts at JP Morgan Securities downgraded the stock to Neutral from Overweight on Tuesday, lowering their price target on the shares to $68 each, down from $171.
Digital Marathon Entries
(MARA)—Like Coinbase, Marathon’s fortunes are closely tied to cryptocurrency spins. The crypto mining company has seen its shares drop by 80% this year.
(MSTR)—Although MicroStrategy is a maker of business intelligence software, it borrowed money to invest in Bitcoin in an attempt to hedge against inflation. As of March 31, the company held 129,218 Bitcoin coins, which were valued at $5.9 billion at the time. In light of Bitcoin’s plunge, stocks are down 70%.
But it’s not just the companies with the most exposure to Bitcoin that have seen their share price drop.
(NVDA) – NVIDIA has long been a popular proxy for cryptocurrency investors, as the chipmaker’s gaming cards are used to mine Ethereum. While the company has historically acknowledged its correlation with the crypto markets, it has said it has “limited visibility” into how much demand for its graphics processing units is driven by cryptocurrency mining.
Nvidia shares are down 46% this year and are trading around $158 each.
Financial firms, which had previously shunned cryptocurrencies, have been allowing customers to trade and hold crypto assets. Cryptocurrencies have yet to be a major factor in the financial results of many of these companies, but stocks rise and fall on cryptocurrency sentiment.
)—As of March 31, Block had $365.5 million worth of Bitcoin. In his most recent earnings report, Block acknowledged that revenue and gross profit from his Bitcoin business could fluctuate due to movements in demand and prices. In fact, in its most recent quarter, 40% of the company’s revenue was linked to Bitcoin, while a year ago cryptocurrency accounted for 70%.
Block shares are down 60% this year, reflecting the drop in Bitcoin and fears that
(AAPL) will further extend its tentacles into the payments space.
(PYPL)—Payment company PayPal has also seen its shares drop 60% this year on concerns about cryptocurrencies, as well as fears of increased competition from Apple. PayPal recently started allowing users to transfer crypto to other digital wallets and exchanges. But analysts are less enthusiastic about PayPal’s forays into crypto, saying the company’s margins would improve if it were to shrink.
(HOOD)—Last year, Robinhood was flying high as retail investors eagerly traded stocks, options and meme cryptocurrencies. This year, the shares are down 60%. Part of that is due to cryptocurrencies losing their shine, but the drop in stocks also reflects lower retail trading volume.
First quarter transaction-based revenue at Robinhood was down by half from a year earlier. The company noted a 73% drop in equity-based revenue, while options and cryptocurrency revenue fell nearly 40%. Over the past year, cryptocurrency has typically accounted for about a quarter of Robinhood’s revenue, but it accounted for 50% of revenue in Q2 2021.
Capital of Silvergate
(SI)—Shares are down 70% this year, largely reflecting concerns about the cryptocurrency crash, as the La Jolla, California-based bank is known as a crypto-focused bank. Its digital customer base has grown to over 1,500 customers at the end of the first quarter, which represents a 40% increase from last year.
Outside of payments businesses, more traditional financial firms have been getting into crypto with mixed results.
)—The New York-based bank has seen its shares fall 45% this year, far exceeding 20% in the
SPDR S&P Bank
ETF (KBE) due in part to crypto exposure. The bank was the first FDIC-insured bank to launch a blockchain-based digital payments platform. That starts to look like a liability when cryptocurrencies are not in your favor.
(SIVB)—Shares of SVB fell 40% as the Silicon Valley-based bank was hit hard by a pullback in initial public offerings and venture capital investment. SVB bills itself as the banker of the innovation economy, so a downturn in crypto is a hurdle.
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