There are many companies out there that are way too attached to bitcoin either by choice or simply because BTC is part of what they do. With the price of the world’s number one digital currency by market cap slumping badly in recent weeks, many firms – including crypto exchange Coinbase and software giant MicroStrategy – are watching their stock prices take massive hits.
Coinbase and MicroStrategy Are Taking Big Dives
MicroStrategy stock, for example, has shot down by roughly 26 percent. The company and its chief executive Michael Saylor have made it a point to stick by the asset no matter what – even when the asset is doing as badly as it is now. The company began buying bitcoin in late 2020 and it hasn’t looked back, but with so many BTC units as part of its reserves, the company is now experiencing some rather drastic losses given that it has tied itself so thickly to the digital currency.
Steven McClurg – chief investment officer at Valkyrie Investments – commented on the situation in an interview, stating:
Crypto and equity markets are largely selling off in tandem due to a broad risk-off environment where many investors are moving to cash. The correlation between the two asset classes has grown more pronounced in recent months because the number of publicly traded companies involved in blockchain continues to grow and is not likely to reverse course… In the short term, we believe the markets will continue to sell off through the summer, especially if rate hikes continue through the June and July FOMC meetings, before staging a potential rally through the end of the year in a pattern that has largely established itself over the past decade. One thing to watch is the yield curve, as an inversion would be a harbinger of further selloff. A recession is imminent.
Coinbase is not in a much better position. Recently, the company saw its stock shares tank by nearly $2 each, though to be fair, it appears at press time that this has less to do with the falling price of bitcoin and more to do with weak Q1 revenue in 2022.
Lower Revenue Than Expected?
The company started being publicly traded in April of last year when it began selling shares on the Nasdaq. Joseph Vafi – an analyst with Canaccord Genuity – said:
Digital asset plays in the equities markets remain a new theme. In our view, so long as underlying industry infrastructure, regulation, and security continue to evolve, we believe simple correlation to other risk-on asset classes is secondary to the long-term outlook, but there will be more than average volatility here at the same time, and in the case of Coinbase, we see a story that can likely exploit the current and future air pockets to solidify its industry position.