The downfall of cryptocurrency exchange FTX has stunned crypto investors. Its bankruptcy filing has hurt many stocks in the crypto space. However, Ark Invest’s founder Cathie Wood remains unfazed and continues to buy stocks from the sector.
In her recent interview with Bloomberg, she said, "We think bitcoin is coming out of this smelling like a rose." She reiterated her price target for bitcoin at $1 million per token by 2030.
Wood has remained optimistic despite the two biggest cryptocurrencies, bitcoin and Ethereum, declining more than 63% year-to-date. FTX’s $32 billion valuation went up in flames as the company’s liquidity evaporated, and it filed for bankruptcy. However, that has not deterred Wood, as she added 1.30 million shares of Coinbase Global, Inc. (COIN) since the start of November and 450K units of Grayscale Bitcoin Trust (BTC) (GBTC) in recent weeks.
Even though the Fed Chairman hinted at slowing the rate increases, the prospects of a recession next year are still high. Bank of America CEO Brian Moynihan predicts a “mild recession” in 2023. With rising interest rates and recession fears, investors will likely stay away from highly risky assets, putting further pressure on the cryptocurrency market.
Many experts believe the crypto winter could extend longer than expected. Although Cathie Wood is buying COIN and GBTC based on her long-term views about the crypto market, we think these are best avoided now.
Coinbase Global, Inc. (COIN)
COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The company offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.
COIN’s total revenue for the fiscal third quarter ended September 30, 2022, declined 55% year-over-year to $590.34 million. Its total operating expenses increased 12.4% year-over-year to $1.15 billion. The company’s net loss attributable to common shareholders came in at $544.63 million, compared to a net income attributable to common shareholders of $405.34 million in the year-ago period.
Also, its loss per share came in at $2.43, compared to an EPS of $1.62 in the year-ago period. In addition, its adjusted EBITDA loss came in at $115.89 million, compared to an adjusted EBITDA of $618.22 million in the year-ago period.
Analysts expect COIN’s EPS to remain negative for fiscal 2022. Its revenue for the quarter ending December 31, 2022, is expected to decline 75.1% year-over-year to $622.86 million. The stock has lost 81.8% year-to-date to close the last trading session at $46.
COIN’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Growth, Stability, and Sentiment and a D for Value, Momentum, and Quality. It is ranked last out of 139 stocks in the F-rated Software - Application industry. Click here to see all the ratings of COIN.
Grayscale Bitcoin Trust (BTC) (GBTC)
GBTC is the largest digital currency asset manager globally. It is solely and passively invested in BTC, enabling investors to gain exposure to BTC in the form of security, thereby eliminating the difficulties of buying, storing, and safeguarding BTC directly.
As of December 5, 2022, GBTC had $3.97 million in net assets. It has a net asset value (NAV) of $8.82.
Its top holdings include Block, Inc. (SQ) with an 11.64% weight, Robinhood Markets, Inc. (HOOD) with an 11.28% weight, and PayPal Holdings, Inc. (PYPL) with a 9.37% weight. It has a total of 20 holdings.
GBTC has declined 73.8% year-to-date to close the last trading session at $8.82.
GBTC’s POWR Ratings reflect this bleak outlook. It has an overall rating of D, which translates to Sell in our proprietary rating system.
It has an F grade for Growth and a D for Value, Stability, and Quality. It is ranked #95 out of 104 stocks in the Financial Services (Enterprise) industry. Click here to see the additional ratings of GBTC for Momentum and Sentiment.
COIN shares were trading at $42.32 per share on Tuesday afternoon, down $3.68 (-8.00%). Year-to-date, COIN has declined -83.23%, versus a -16.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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