This has been anything but an easy day for investors in cryptocurrencies and related stocks. After the Federal Reserve announced a 75 basis point increase in interest rates yesterday, the market pushed crypto higher, but the rebound did not last and stocks fell on Thursday morning. Percentage moves are pretty low at noon ET because the Fed announcement came after noon, but look at the volatility we’ve seen.
Bitcoin (BTC -8.48%) it reached a low of $20,222 and a high of $22,974 in the last 24 hours, but was down just 1.7% during that time. Ethereal (ETH -11.58%) saw a low of $1,042 and a high of $1,257 and is down just 0.6%. Solarium (SUN -12.36%) it traded as low as $28.07 and as high as $36.00, but is now up 5.5%. base of coins (CURRENCY -7.20%) it has traded as much as 8.8% lower today and is currently down 5.8%.
Cryptocurrency values track trading on the Nasdaq Composite, which reacted positively to yesterday’s Federal Reserve news and then sold off sharply in Thursday’s trading. Since cryptocurrencies are generally more volatile than the market as a whole, it is not surprising to see big swings today.
To make matters worse, there is growing speculation that the Three Arrows Capital crypto fund, which manages an estimated $10 billion, could be insolvent and have large positions that could be liquidated. This could lead to more panic selling in the crypto markets in general. Yield farming and staking platform Finblox went so far as to limit withdrawals to $1,500 per month for clients.
Speculators in the crypto markets are being crushed as liquidity dries up and valuations fall. The problem for Coinbase is that their business is based on fees, so the drop in trading will hit revenue hard and that is why the stock continues to fall.
The stock market clearly doesn’t know which direction to go at the moment. Interest rates are rising, a recession is likely, and crypto speculators are falling left and right. This is what is often called a “crypto winter” and it looks like we are headed in that direction at the moment.
It appears that cryptocurrency in general is slowing down and there is no clear rebound in the offing for the market. But there is still a lot of development in the blockchain, and in the long run, that is what will add value. Companies like Coinbase that have the balance sheet to get through this crypto winter should be well positioned if or when the market recovers.
I am still excited about the future of crypto and blockchain, but there will be a lot of pain ahead for the market. That has generally led to opportunities in the past if investors can find the survivors and the ultimate winners, which I think Coinbase, Ethereum and Solana have a good chance of being.