Monat: Mai 2023

Woo Network, Conflux, and Kava prices held quite well even as American stocks continued plunging. WOO jumped by over 11.3% in the past 24 hours as we wrote here while Conflux and Kava soared by over 6%. Bitcoin remained steady at $29,000 while Ethereum and BNB prices held at $1,890 and $325, respectively. 

US equities plunge

American stocks continued falling on Thursday as investors reacted to the latest interest rate decision by the Federal Reserve. In it, the bank decided to hike interest rates by 0.25%, bringing the headline rate to between 5.0% and 5.25%. That was the highest rate the US has been in more than a decade.

Analysts believe that the Federal Reserve will now pause rates as it observes the state of the financial market and inflation. The hope is that the elevated inflation will help to limit inflation. Data published last month showed that the headline consumer inflation dropped to 5.0% in March and analysts believe that the situation will continue as crude oil prices continue dropping.

Cryptocurrencies like WOO, CFX, and KAVA did well even as the banking crisis in the US escalated. PacWest stock price has plunged by more than 50% on Thursday while Western Alliance and Comerica slumped. In all, the SPDR Regional Bank ETF dropped by over 5% and has crashed by more than 30% in the past three months. 

Therefore, there is a likelihood that we will see more banks collapse this year. Already, companies like First Republic, Silicon Valley Bank, Signature, and Silvergate have all collapsed. And on Thursday, the Dow Jones, Nasdaq 100, and S&P 500 indices dropped by almost 1% each.

Bank collapses impact on crypto

Analysts believe that the collapse of these regional banks has a positive impact on cryptocurrencies for two main reasons. First, some analysts and investors see cryptocurrencies as safe havens which do well when there are elevated risks. They, especially Bitcoin, are now being seen as safe-haven assets.

Second, the collapse of these banks will lead to a slowdown of the American economy and force the Fed to intervene. In periods like these, the Fed tends to intervene by either reducing its quantitative tightening or by reducing rates.  A pivot of the Fed will likely be positive for WOO, Conflux, KAVA, and other cryptocurrencies as we saw during the pandemic.

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The post WOO, Conflux, KAVA prices lead gains as bank stocks plunge appeared first on CoinJournal.

Key Takeaways

• Coinbase stock is down 87% from its IPO price, the company now worth $11 billion
• Regulators are moving in on the industry in the US, creating an increasingly hostile environment
• Share price reflects these developments, as well as plummeting volume in the crypto space, writes our Head of Research, Dan Ashmore 

Coinbase is at war. 

The exchange is the only publicly traded crypto platform in the US, an attribute that appeared a massive strength at the time of its IPO in April 2021. This was a time when Bitcoin was trading at $63,500, dinner tables were filled with questions such as “how high can it go?”, and everybody wanted a piece of the crypto pie.

Things are a little different today. Coinbase’s status as a public company may be helping it with regard to transparency in an increasingly opaque crypto industry, but it is also presenting its troubles for everybody to see. The stock is down 87% from the price it floated at.  

Coinbase faces a fight on multiple fronts

I wrote a deep dive on the prospects of the company last October, after it was revealed CEO Brian Armstrong had sold 2% of his stake. Seven months on, crypto prices have rebounded strongly but Coinbase’s future seems murkier than ever. 

The company faces challenges on multiple fronts. The first, obviously, is the state of the crypto industry. Prices, volumes and interest have evaporated at an alarming rate over the 18 months. The Federal Reserve’s transition to tight monetary policy in the face of rising inflation has sucked liquidity out of the economy and crushed assets residing on the far end of the risk spectrum. And make no mistake, crypto is most definitely out there on the risk curve. 

Bitcoin has careened down as low as $15,500 this cycle, a drawdown of 77% from its peak. It currently trades at $29,000 following a bumper first quarter of the year, but the issues with Coinbase go beyond merely crypto prices. 

The industry has been under siege from regulators this year, with the SEC in particular clamping down on a space that conceived multiple scandals last year – most notably the spectacular collapse of not-so-stable stablecoin UST and crypto exchange FTX. 

Coinbase is bracing itself for action after it received a Wells notice earlier this year. A Wells notice is a formal warning from the SEC that evidence of proof of lawbreaking has been found, and legal action will likely be recommended. 

The SEC claims Coinbase’s staking service, Prime and Wallet products, as well as its general listing process, may all be in violation of federal securities law.

The exchange is fighting. It has accused the SEC of levelling legal accusations “on the fly” and contended that legal action against Coinbase would pose “major programmatic risks” and would “fail on the merits”. 

The exchange has repeatedly criticised the lack of regulatory clarity for crypto. SEC chair Gary Gensler has contended that “Crypto markets suffer from a lack of regulatory compliance. It’s not a lack of regulatory clarity”. 

But like it or loathe it, the SEC is calling the shots, and this is all very bad news for Coinbase. The fear is very real that the US environment is simply becoming too hostile for crypto. Coinbase knows this, even if it disagrees with why it is happening. 

This week, it announced the launch of the Coinbase International Exchange (CIE), an institutional platform for international derivatives trading. But the fear can really be seen in the share price. While we mentioned the fact the crypto industry has been ravaged, Coinbase has underperformed even Bitcoin significantly over the last year. 

Perhaps the two best benchmarks for Coinbase’s performance are Bitcoin and the Nasdaq. The below chart shows how wide the chasm has been.

Even this year, as prices have rebounded across the crypto industry, the exchange has failed to keep up. Its stock may be up 44% year-to-date, but Bitcoin is up 68%. 

The bottom line is that Coinbase has two huge problems. The first is that the industry it operates is has melted down compared to the lofty highs during the pandemic, and the second is that regulators are very much threatening its existence as a US company. 

Neither of those problems have easy fixes. And the share price reflects that. 

The post Report: Coinbase share price continues to fall, as regulators and crypto volumes worsen appeared first on CoinJournal.