What happened
This has been anything but a straightforward day for investors in cryptocurrency and related stocks. After the Federal Reserve announced a 75 basis point increase in interest rates yesterday the market pushed crypto higher, but the bounce didn't last and values were falling on Thursday morning. Percentage moves are fairly low at noon ET because the Fed announcement happened after noon, but look at the volatility we've seen.
Bitcoin (BTC 2.72%) hit a low of $20,222 and a high of $22,974 in the last 24 hours but is down just 1.7% over that time. Ethereum (ETH 3.17%) saw a low of $1,042 and a high of $1,257 and is down just 0.6%. Solana (SOL 3.00%) traded as low as $28.07 and as high as $36.00 but is now up 5.5%. Coinbase (COIN 2.67%) has traded as much as 8.8% lower today and is currently down 5.8%.
CRYPTO: BTC
Key Data Points
So what
Cryptocurrency values are following trading on the Nasdaq Composite, which reacted positively to the Federal Reserve news yesterday and then sold off sharply in Thursday trading. Since crypto is generally more volatile than the market as a whole, it's not surprising to see big swings today.
To make matters worse, there's growing speculation that crypto fund Three Arrows Capital, which manages an estimated $10 billion, might be insolvent and have large positions that could be liquidated. This could lead to further panic selling in crypto markets generally. Staking and yield farming platform Finblox went as far as limiting withdrawals to $1,500 per month for customers.
Speculators in crypto markets are getting crushed as liquidity dries up and valuations fall. The problem for Coinbase is that its business is fee-based, so the drop in trading is going to hit revenue hard and that's why the stock continues to drop.
CRYPTO: SOL
Key Data Points
Now what
The stock market clearly doesn't know what direction to go at this point. Interest rates are rising, a recession is likely, and crypto speculators are falling left and right. This is what's often called a "crypto winter" and it seems we're heading in that direction right now.
It seems that cryptocurrency in general is slowing down, and there's no clear bounce coming for the market. But there's still a lot of development taking place on the blockchain, and long term, that's what's going to add value. Companies like Coinbase that have the balance sheet to make it through this crypto winter should be well positioned if, or when, the market recovers.
I'm still excited about the future of cryptocurrency and the blockchain, but there will be a lot of pain ahead for the market. That has typically led to opportunities in the past if investors can find the survivors and ultimate winners, which I think Coinbase, Ethereum, and Solana have a good chance at being.
