For investors in a wide range of crypto stocks, today’s session has brought a lot of pain and not enough relief. Shares of Coinbase (NASDAQ:COIN), Marathon Digital (NASDAQ:MARA), Riot Platforms (NASDAQ:RIOT) and MicroStrategy (NASDAQ:MSTR) are down between 1% and 8% in today’s session, although these early afternoon declines have improved from the morning’s initial plunge.
These Bitcoin (BTC-USD) related stocks have each felt the pain of lower BTC prices, with the world’s largest cryptocurrency declining 5% over the past 24 hours as of this writing.
This move appears to be related to a myriad of headwinds forming in the crypto world. Global risk-off sentiment appears to be taking hold, with most major indices around the globe bleeding red. In fact, Japan’s Nikkei 225 saw its worst drop since Black Monday in 1987 today, with the key index dropping more than 12% in an incredibly bearish sell0ff.
Let’s dive into what may be behind this decline and why Bitcoin hasn’t shown some of the fundamentals many experts expected to see (as a digital store of value) so far.
These Crypto Stocks Are Getting Hammered
In a risk-off environment, one may reasonably surmise that certain higher-risk or higher-beta equities may be sold off more aggressively. Today, that’s certainly the case. And while risk-off sentiment continues to be building around risk assets overall, it should also be true that Bitcoin’s status as quasi “digital gold” should amount to some sort of safe harbor trade, particularly among institutional investors who now have access to exchange-traded products directly tracking the price of Bitcoin.
This hasn’t been the case today. So, for Bitcoin miners like Marathon Digital and Riot Platforms, exchanges like Coinbase and Bitcoin-holding companies like MicroStrategy, today’s decline in BTC means a sharp downturn in their respective values.
What’s interesting is that some of these companies are currently down far less than the price of Bitcoin. This could be due to the fact that there are a number of investors who believe this brief dip could be just that — brief.
We’ll have to see. For now, though, I think the jury remains out with respect to how prolonged this period of asset selling may be. The unwind of the Japanese yen carry trade is interesting and it does seem like certain investors are selling more liquid assets (Bitcoin can definitely be included in this group). Additionally, with so much BTC owned globally (with a particular emphasis on Asia), any sort of broader global downturn could mean the search for liquidity could be bad for Bitcoin-related stocks in the short term.
On the date of publication, Chris MacDonald did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
