What happened
Shares of several crypto stocks crashed this week as investors geared up for third-quarter earnings reports and in the wake of the Federal Reserve's November meeting earlier this week.
For the week, shares of the large crypto exchange Coinbase (COIN +4.79%) traded more than 20% lower in the final hour of trading Thursday, according to data provided by S&P Global Market Intelligence. Shares of the crypto bank Silvergate Capital (SI +27.27%) traded nearly 14% lower, and shares of the Bitcoin miner Marathon Digital Holdings (MARA +1.30%) were down nearly 23%.
So what
As expected, the Fed raised its benchmark overnight lending rate, the federal funds rate, by 0.75 percentage points at the conclusion of its November meeting. The federal funds rate now sits within a range of 3.75 to 4 percentage points.
Image source: Getty Images.
Many investors have been expecting the Fed to pivot from its hawkish policy that has led to jumbo-sized interest rate hikes all year long. Rate hikes have been particularly detrimental to riskier assets like cryptocurrencies, which has, in turn, heavily impacted crypto stocks.
At first glance at the Fed's initial statement, it looked like a pivot was well underway. The Fed changed language in its meeting statement that said when deciding on future interest rate hikes, "the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
Markets jumped on the language change until Fed Chairman Jerome Powell told the public at his press conference yesterday that the Fed may move interest rates to "higher levels than we thought." That took the wind out of the market's sails, and stocks tumbled late yesterday and into today.
Investors have also been digesting and gearing up for earnings reports. Coinbase will report after the market closes today, and investors are preparing for a bad report in what has been a brutal crypto winter for the stock.
Today got off to an eerie start when Coinbase, in a regulatory filing, announced that its chief product officer, Surojit Chatterjee, would step down at the end of the month. Coinbase's product, engineering, and design teams will now be reorganized into one product group.
NASDAQ: COIN
Key Data Points
The consensus analyst estimate for Coinbase in the third quarter is a loss of $1.47 earnings per share on revenue just shy of $642 million. Silvergate's earnings report a few weeks ago disappointed investors after the bank saw deposit outflows from its digital asset clients and less activity on its real-time payments platform for crypto traders.
In other news, Marathon announced today that it mined a record 615 Bitcoin in October, which is an increase of 71% year over year, as the company also saw increased computing power.
Now what
The crypto winter has clearly been tough on the entire crypto industry, but Silvergate Capital still remains one of my favorites because it provides critical infrastructure with its real-time payments system to a growing industry of institutional crypto traders and crypto companies. Silvergate also plans to launch a U.S.-dollar-backed stablecoin sometime next year.
I expect that Coinbase likely had a tough third quarter due to depressed crypto trading activity, but I still think the stock is worth holding. If crypto trading interest rebounds, I think Coinbase's stock will likely follow suit.
While Marathon has been hammered this year and will likely see its stock rise if Bitcoin does, I personally would simply rather own Bitcoin over a Bitcoin-mining company.
