Cryptos continue to be one of the most polarizing and volatile investments today. Digital coins and tokens such as Bitcoin and Ethereum are both celebrated and vilified around the world. In China, the government is aggressively shutting down mining operations. In El Salvador, however, the government has just made BTC legal tender.
Investors also continue to be split on the true underlying value of cryptocurrencies. While retail investors call loudly for access to exchange-traded funds (ETFs) that track the prices of cryptos, the chair of the U.S. Securities and Exchange Commission (SEC) has vowed to regulate the market for digital assets.
With so much controversy and divisiveness, it should come as no surprise that many market analysts are forecasting a long “crypto winter” ahead. They foresee prices falling sharply. So, here are seven cryptos and crypto-related stocks to sell ahead of the coming deep freeze.
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Cardano (CCC:ADA-USD)
- Coinbase (NASDAQ:COIN)
- Riot Blockchain (NASDAQ:RIOT)
- Bit Digital (NASDAQ:BTBT)
- PayPal (NASDAQ:PYPL)
Cryptos to Sell: Bitcoin (BTC)
As the largest and most popular pick of the cryptos, Bitcoin continues to endure volatile price swings. On Sept. 20, the price of BTC dropped 10% on the heels of a broad stock market selloff.
After peaking above $64,000 in mid-April, Bitcoin fell about 55% to just under $30,000 before bouncing back up to nearly $53,000 at the beginning of September. Now, though, it has retreated again to its current level of around $44,000. The swings have been big (and often scary) for even the most bullish cryptocurrency investors.
The latest rollercoaster in Bitcoin’s price was not sparked by the current stock market rout. Instead, it came after El Salvador officially adopted the cryptocurrency as legal tender. While many crypto enthusiasts hailed the move by El Salvador, it prompted a selloff in Bitcoin nevertheless.
The fact that the adoption of Bitcoin in the Central American country was greeted by huge street protests didn’t calm investors’ nerves. So, should the “crypto winter” prolong, you can bet on the price of BTC continuing to decline.
Until the September market rout took hold, things had been looking up for Ethereum. Earlier in the month, the second-largest cryptocurrency by market capitalization had seen its price rally above $3,400 for the first time since May.
This move higher came after the implementation of the layer two scaling solution known as Arbitrum One, which allows users to transact with lower fees. Back in May of this year, Ethereum peaked at an all-time high of $4,362 per coin before retrenching over the summer months.
However, the price of ETH began to recover in August after an upgrade called “London” was undertaken. The upgrade will change the way transaction fees related to Ethereum are estimated. Currently, users must bid how much they’re willing to pay to have their transaction picked up by a miner, which can be expensive. After the upgrade, the process will be handled by an automated bidding system with a set fee amount that fluctuates based on how congested the network is at the time.
But that’s not all. The London upgrade also started a process to reduce the supply of Ethereum, which will help boost its price. Still, although these updates are encouraging, the recent gains in ETH have proved fleeting. This pick of the cryptos now trades for around $3,100. Further declines can be expected.
Cryptos to Sell: Cardano (ADA)
Possibly no cryptocurrency has done as well as Cardano in recent months. At the very beginning of September, the price of ADA rose above $3 for the first time after developers began implementing upgrades that will allow smart contracts to be built on its network. As excitement built about the network upgrade called “Alonzo,” Cardano’s price enjoyed a spectacular run from August into September.
Now, Cardano is the third-largest cryptocurrency after Bitcoin and Ethereum in terms of market capitalization. This name’s price rose some 130% from Aug. 1 to its September peak. Today, the crypto is now up 2,800% for the past one year although it has fallen back, closing at $2.26 on Sept. 22.
Allowing smart contracts to be built on its network, the Alonzo upgrade will potentially make Cardano’s blockchain more attractive to users. The upgrade could also make ADA more of a rival to Ethereum, which already offers smart contracts. That said, although investors remain optimistic about this one’s future, the near-term outlook for cryptos at large is now much murkier than it was even a few weeks ago.
It has been a rough ride for Coinbase since this largest exchange for cryptos in the U.S. went public in April via a direct listing. After opening at $381 per share — giving the company a valuation of $100 billion — COIN stock has since retreated about 27%. The stock now trades around the $240 mark.
As COIN stock failed to live up to its promise, what had been hailed as a landmark event for the cryptocurrency industry quickly fizzled. Yet, despite the decline, many crypto enthusiasts remain high on Coinbase and its future. For one, Ark Invest’s Cathie Wood has continued to buy shares as the price has slumped.
Of course, Coinbase has certainly showed promise since its market debut. The company’s second-quarter earnings — its first results as a publicly traded company — were much stronger than analysts had predicted. Coinbase reported revenue of $2.2 billion versus an expected $1.78 billion. Earnings per share (EPS) also came in at $3.45. However, perhaps most stunning was its net profit. That totaled $1.6 billion, “up nearly 4,900% from a year earlier, following a volatile stretch of trading for cryptocurrencies,” according to CNBC.
That said, could the current market volatility drive earnings even higher? Given the struggles of COIN stock in recent months, it’s probably best for investors to not bet on it. The company is also feuding with the SEC — a matter that will not likely resolve itself (or end in the exchange’s favor).
Cryptos to Sell: Riot Blockchain (RIOT)
Next up on this list of cryptos and crypto-related stocks to sell is Riot Blockchain. Shares of this Bitcoin mining company are as volatile as the cryptocurrency its business is based on. Need an idea of just how volatile the share price is? Consider this: RIOT stock is currently up 72% year-to-date (YTD) but is down 48% over the past six months.
Currently trading for around $29 per share, Riot continues to whipsaw up and down, mirroring the price movements of BTC. The Colorado-based company’s share price is now well below its 52-week high of nearly $80. And if Bitcoin’s price continues to decline? It’s a safe bet that RIOT stock will follow.
Like Coinbase, Riot Blockchain has leveraged the volatility in cryptos to its advantage. The company reported that its Q2 revenue rose a mind-boggling 1,540% year-over-year (YOY). Riot Blockchain’s net income for Q2 also totaled $19.3 million, or 22 cents per share. Last year, it had reported a net loss of $10.6 million in its second quarter.
The incredible turnaround in Riot Blockchain’s fortunes was attributed to growth in its mining operations, even as similar operations have been cracked down on around the world, especially in China. Still, solid Q2 or not, RIOT is not without risk.
Bit Digital (BTBT)
Another highly volatile Bitcoin mining stock is Bit Digital. Essentially a smaller version of Riot Blockchain, the BTBT share price has taken a pounding this year on volatile cryptocurrency markets. More specifically, BTBT stock is down 57% YTD. It closed at $9.59 on Sept. 22.
In the past month alone, shares of this company have fallen almost 22%. Moreover, much of that decline came before the broader market swooned in September. That steep drop in its share price reflects the speculative nature of Bit Digital.
Having previously had mining operations in China, BTBT stock has also been dragged down due to the intensifying crackdown. Now adjusting to focus its mining in the United States, the company is seen by many analysts as having upside potential. However, with all cryptos being dragged down right now, it’s a safe bet that BTBT will also continue to plummet.
Investors should remain on the sidelines with Bit Digital until its bottom becomes apparent. Keep in mind, the stock’s 52-week high is $33 per share.
Cryptos to Sell: PayPal (PYPL)
While PayPal isn’t the only fintech (financial technology) company that has exposure to cryptos, it has been one of the most aggressive when it comes to digital coins and tokens.
For example, this California-based company just announced that it has completed its “first international expansion” of its cryptocurrency offering outside of the States. The offering is now available to customers in the United Kingdom, allowing consumers and business owners there to buy, hold and sell four kinds of cryptos, including Bitcoin.
PayPal launched its Crypto service in the U.S. in October last year. Today, more than 400 million consumers and merchants have access to the company’s cryptocurrency products. Additionally, PYPL made the service available on its Venmo mobile payment service back in April. Finally, the company announced plans to expand its crypto services this summer, hiring more than 100 cryptocurrency expert positions to help develop and bolster its products.
Clearly, PayPal wants to be a leader in this space. Still, the strategy could backfire in the event of a prolonged slump in digital coin prices. Year-to-date, PYPL stock is up nearly 19%, having closed at around $272 on Sept. 22.
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On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.