A bear market may be forming in Bitcoin, which could contribute to the sell off of some high-yielding stocks, if not the market as a whole.
), to name just a few, are trading a closer correlation with the digital currency. Tesla recently bought $ 1.5 billion of the digital currency and said it plans to accept it as payment, prompting a surge in its shares.
High-growth stocks are under pressure due to fears of rising interest rates and bond yields, which reduce the present value of future cash flows. Tesla and online payment stocks are crowded trades too, making them vulnerable to a sell-off.
and Square are becoming digital currency brokers, allowing consumers to buy and store Bitcoin in their apps, with the goal of eventually being used by people to make purchases.
Stocks have been falling as Bitcoin has been in freefall. The digital currency was recently trading around $ 47,300, down 10% in the last 24 hours and 18% from highs of around $ 58,000 on February 21, according to CoinDesk.
Falling Bitcoin prices may be helping to reduce the
Index, which fell 2.5% on Monday and 2.2% on Tuesday.
The Bitcoin sell-off may have been delayed after its surge in recent months, and it may have received a push from Treasury Secretary Janet Yellen. She labeled Bitcoin an “inefficient” currency and warned it could be a sign of speculative excesses, in an interview published by the New York Times on Tuesday.
Traders appear to be taking Yellen’s comments as a sign that regulators in the Biden administration may erect more regulatory hurdles for cryptocurrencies, making it more difficult for banks and brokerages to offer trading services in digital currencies.
and other higher-cap indices may be more closely tied to Bitcoin as the list of companies involved in crypto technology or services expands. Now includes chip maker
(NVDA), the internet retailer
(OSTK) and banks like
(SBNY). Changes and brokerages like
Cboe Global Markets
(CBOE) and Interactive Brokers (IBKR) are also turning into crypto bets as they expand trading in digital currency-related futures and options.
Tesla’s push in Bitcoin was a vote of confidence in cryptocurrencies, but it may also have made Tesla a proxy for the currency, prompting an exodus of shares from investors who wanted a carmaker, not a game. of cryptocurrencies.
“When Musk and Tesla aggressively embrace Bitcoin (also from a transactional perspective), investors are beginning to link Bitcoin and Tesla at the hip,” Wedbush Securities analyst Dan Ives wrote in a note Tuesday, referring to the CEO of Tesla, Elon Musk.
The rise of Bitcoin has also done wonders for stocks that were left for dead. Overstock, for example, increased 850% from $ 2.50 to $ 85 over the past year, including a 77% increase this year. The company has created a portfolio of blockchain and crypto companies under its Medici Ventures division. He now plans to turn that unit into a limited partnership called the Pelion Venture Partners Fund.
Excess stocks were down 10% on Tuesday, continuing a slide in recent days as Bitcoin prices tumbled.
The impact of Bitcoin is strongly felt on PayPal and Square. Businesses earn transaction fees on cryptocurrencies and appear to be increasing customer engagement and revenue per user, compared to clients who are not involved in crypto.
No business makes much of a profit from Bitcoin so far, and transactions involving the currency make minimal contributions to revenue. Wolfe analyst Darrin Peller estimates that Bitcoin contributes less than 1% to PayPal’s revenue and slightly more to Square’s.
“It’s not a major revenue driver, but it’s a useful tool to engage customers more,” he says. “As more people engage with apps, they use their digital wallets more often and more money goes into the ecosystem.”
In fact, apps could be conduits for Bitcoin to go mainstream. That, in turn, has fueled enthusiasm for the stock.
But now they are falling in tandem with Bitcoin. PayPal shares fell 6% Tuesday to $ 258 and are down 15% in the last five sessions from all-time highs of around $ 305.
Square, which reports earnings after Tuesday’s close, was down 7% to $ 248, down 9% from its closing record of $ 272.75 on February 12.
The total value of Bitcoin is still formidable at almost $ 1 trillion. The blockchain technology behind it is being adopted by banks and other financial firms.
(WFC) have invested in blockchain. The custodial bank
Bank of New York Mellon
recently announced that it would hold, transfer and issue crypto for asset management clients.
More banks are eager to offer crypto services, he noted.
Bank of America
in a report Tuesday, but they are awaiting guidance from Washington. However, it may be a while before investors see any impact on their income statements, especially if the Bitcoin bubble is now bursting.
Write to Daren Fonda at [email protected]