In a wild series of trading sessions, blockchain miner Marathon Digital (NASDAQ:MARA) recovered from the market pain associated with the recent banking crisis. Marathon held deposits at Signature Bank (NASDAQ:SBNY), which was seized by regulators on Sunday in an effort to stem the contagion of SVB Financial’s (NASDAQ:SIVB) Silicon Valley Bank’s implosion. Fortunately for MARA stock, the underlying enterprise reported that its funds are secure and available for use.
Indeed, the broader cryptocurrency sector also rebounded sharply. After falling below the critical $1 trillion mark, the total market capitalization of all cryptos recovered this benchmark and then some. At the time of writing, most of the digital assets in the top 10 by market cap flipped their trailing-week losses into positive returns. Still, a long road to recovery likely awaits MARA stock and the virtual currency complex.
According to CNBC, Signature represents the third-largest bank failure in U.S. history. Thus, while cryptos soared as federal regulators rushed to backstop the recently failed financial institutions, the larger lesson centers on concerns about ongoing economic vitality. Should other bank customers and investors panic, the matter may impose untold consequences.
During the early afternoon session, two of the three major indices went slightly negative. The Nasdaq holds onto positive ground, but barely, at half-a-percent up.
MARA Stock Faces Longer-Term Questions
Although the jubilant reaction of MARA stock and the underlying crypto sector seemingly bodes well for blockchain-focused investors, it would be reckless not to acknowledge rapidly burgeoning risks. In particular, investors dumped European bank stocks for the third straight day on Monday.
Understandably, pensive investors want to protect their portfolios so some of the selling pressure makes sense. However, what has market observers on edge centers on the current selloff. The red ink continues to splatter on the canvas despite the U.S. and U.K. governments’ dramatic moves over the weekend to shore up confidence.
Perhaps most conspicuously, CNN reports that “Europe’s benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 5.6% by mid-afternoon — notching its biggest fall since March last year.”
Adding to concerns for MARA stock specifically, its 20% swing higher only took shares to half-a-percent below parity for the trailing week. To be fair, MARA is up around 83% since the January opener. However, in the past 365 days, it incurred a roughly 71% loss.
Why It Matters
Given the recent developments, the Federal Reserve faces tough questions ahead. If it continues to tighten monetary policy, the banking contagion may worsen. However, if it attempts to save the financial sector, the subsequent dovishness could worsen inflation, causing severe economic damage.
Unfortunately, stakeholders of MARA stock also face difficult decisions. With the Fed ultimately committed to tackling inflation, reverting to a dovish strategy would contradict its main objective. Thus, investors need to consider all angles before proceeding forward.
On the date of publication, Josh Enomoto 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.
