What started off as a promising rally yesterday ended up losing a lot of steam by Tuesday morning. While many traders hoped this “Santa Claus” rally would hold throughout the rest of the week, Tuesday’s performance ended up being a bit more muted than most expected. However, the worst-performing sector was crypto-related stocks, most of which were down by double-digit percentage margins.
The main reason for this crypto stock selloff had to do with plummeting bitcoin prices. Over the past 24 hours, bitcoin fell by over 6.5%, dropping below its closely-watched $50,000 support level. While there wasn’t a clear reason for why this happened, it was enough to cause ripples throughout the crypto ecosystem as other cryptos reacted. In contrast, most traders were expecting the markets to do fairly well this week, being straddled between Christmas and the new year.
In response, crypto stocks were largely in the red on Tuesday as investors reacted to these losses. In terms of sheer market cap, the biggest loser was Coinbase (NASDAQ: COIN), the world’s top cryptocurrency exchange, which shed 6.8% over the course of the day. Even though Coinbase has been reporting reasonable quarterly results of late, and the underlying business isn’t affected by these sudden crypto price swings, its stock price still moves in tandem with the rest of the crypto market.
Other crypto stocks on the move included Robinhood (HOOD), another exchange that was down 5.5%. Various crypto miners were also in the red on Tuesday, including MicroStrategy (NASDAQ: MSTR), Marathon Digital Holdings (NASDAQ: MARA), and Riot Blockchain (NASDAQ: RIOT). All of which were down between 9.5% and 12.0% by the end of Tuesday’s trading session.
Despite having a tumultuous year, most crypto stocks are still up by quite a large margin. MicroStrategy is up 33% since the year began. The main exception to this seems to be exchanges like Coinbase, which are down almost 20% since going public this year. The post-IPO craze surrounding crypto exchanges seems to have worn off by now.
In spite of these losses, most analysts remain highly optimistic about the future for Coinbase. Oppenheimer analyst Owen Lau made Coinbase his top stock pick for 2022, citing that further crypto adoption will help push shares up in the long run. This is especially true for institutional investors as, in his opinion, the institutional market has yet to manifest the same level of enthusiasm as the retail market has shown for crypto.
Coinbase Company Profile
Founded in 2012, Coinbase is the leading cryptocurrency exchange platform in the United States. The company intends to be the safe and regulation-compliant point of entry for retail investors and institutions into the cryptocurrency economy. Users can establish an account directly with the firm, instead of using an intermediary, and many choose to allow Coinbase to act as a custodian for their cryptocurrency, giving the company breadth beyond that of a traditional financial exchange. While the company still generates the majority of its revenue from transaction fees charged to its retail customers, Coinbase uses internal investment and acquisitions to expand into adjacent businesses, such as prime brokerage, data analytics, and collateralized lending. – Warrior Trading News
