What happened
Several stocks in the crypto industry struggled today along with the broader crypto and stock markets.
As of 2 p.m. ET, shares of large crypto exchange Coinbase Global (COIN -5.10%) had fallen nearly 5%, shares of U.S. Bitcoin-mining company Cipher Mining (CIFR -3.53%) had fallen more than 10%, and shares of crypto bank Silvergate Capital (SI 9.76%) traded more than 6% down.
So what
Stocks and cryptocurrencies continued their volatile ways today, following up a nice recovery yesterday afternoon with several of the main benchmark indexes struggling out of the gate and into the afternoon.
Investors continue to try to navigate markets amid intense uncertainty. Russia's invasion of Ukraine continues, inflation remains high, and the Federal Reserve recently raised its benchmark overnight lending rate, the federal funds rate, in March in what could be the first of many rate hikes this year. The Fed is also expected to begin reducing its massive balance sheet later this year. Furthermore, bond yields and oil prices have been elevated and are also bouncing around, giving the market a lot to digest and making any kind of momentum hard to sustain.
Image source: Getty Images.
Nothing obvious appears to be impacting Silvergate Capital and Cipher Mining today, aside from broader market sentiment. Silvergate reported earnings results for the first quarter of the year last week, resoundingly beating estimates despite a drop in crypto trading volume in the first three months of the year.
Meanwhile, Coinbase continues to hit new all-time lows since going public about a year ago. The stock is down more than 62% since going public. Analysts continue to grapple over when the stock will bottom.
J.P. Morgan analyst Kenneth Worthington recently trimmed the stock's price target from $296 to $258, which still implies extreme upside with the stock currently trading around $128 per share. Worthington also reduced the bank's estimates for Coinbase's first-quarter earnings results from a $0.12 loss to a $0.27 loss, while also cutting full-year estimates. Slowing crypto trading volume and lower prices are a headwind to Coinbase's business.
Not all are down on the stock, however. Owen Lau, executive director at Oppenheimer, recently told Yahoo! Finance that he sees Coinbase as "one of the most disruptive companies" and that he doesn't think the market is factoring in long-term crypto adoption.
"If you look at a longer horizon, like three, five, 10 years from that perspective, if you ask me, do I think more or less people with own digital assets or use digital assets? I would say it would be more," he said.
Now what
I agree with Lau that cryptocurrencies are becoming a bigger part of everyday life. Right now, it seems this is mainly due to cryptocurrencies as an investment. But there are more companies popping up that will help consumers and businesses use cryptocurrencies for daily purchases and payment transactions. Stablecoins, digital assets pegged to a commodity or fiat currency, are also gaining in popularity.
Due to this trend, I am bullish on Coinbase in the long term as playing a major role in helping people trade cryptocurrencies.
I am even more bullish on Silvergate Capital, which runs a real-time payments system that better facilitates crypto trading and plays a key role in providing infrastructure for the crypto industry. Silvergate is also planning to roll out a U.S. dollar-backed stablecoin, which will make it the only stablecoin to be issued by a highly regulated financial institution.
