There was a period when crypto stocks were performing so well that certain investors started trading them over cryptocurrencies themselves as a means to mitigate risk. Cryptocurrency stocks were praised by many for having less volatility, but over the last year, this no longer seems to hold any truth. Unfortunately for some, the companies underlying the basic infrastructure of cryptocurrency, blockchain and cryptocurrency investment are grossly underperforming compared to crypto assets themselves.
Cryptocurrencies Having A Tough 2022
Cryptocurrencies haven’t been performing the best over the last year. Both Bitcoin and Ethereum are down. Bitcoin has dropped 17.41% year to date. Ethereum is down 22.28% year-to-date. Even currencies like XRP at -12.24% YTD and Binance Coin at 24.32% are slipping in 2022.
The Consequent Slip Of Crypto Stocks
It should therefore come as no surprise that public companies with a focus on cryptocurrency are suffering as well. The main downside for investors is that crypto stocks are feeling the crunch even more than cryptocurrencies. Just look at the year-to-date performance of the following cryptocurrency exchanges, miners and firms:
Coinbase Global Inc. (NASDAQ: COIN) – -45.4%
Riot Blockchain (NASDAQ: RIOT) – -43.71%
Marathon Digital Holdings (NASDAQ: MARA) – -41.26%
Grayscale Bitcoin Trust (OTCMKTS: GBTC) – -14.39%
Block (NYSE: SQ) – -34.34%
Canaan Inc (NASDAQ: CAN) – -24.76%
Hut 8 Mining (NASDAQ: HUT) – -46.98%
Terawulf Inc (NASDAQ: WULF) – -65.79%
Narrowing Market Means Narrowing Number Of Trades
JPMorgan analysts have determined that the market capitalization of cryptocurrency companies had dropped from approximately $100 billion in November of 2021, when BTC touched its record high, to just $60 billion as of the end of April at the time of writing. One must keep in mind just how small the market is becoming, as Coinbase itself equates to $20 billion in market share. This is far worse but still comparable to how the trading volume of the top ten cryptocurrency exchanges has dropped by 40% from the fourth quarter to the first quarter, according to data from CoinGecko.
Prospects For Coinbase Global Shares
There’s no better example of the difficulties faced by crypto stocks than Coinbase Global. As if Coinbase stock wasn’t already suffering, share prices plummeted even further after JP Morgan analyst Kenneth Worthington reduced his price target by over 30%. Worthington expects Coinbase Global Inc. stock to reach $258 instead of his original target of $296 for the year and cites that a “bigger loss” is expected in the first and second quarters of the new financial year. He also added that most of the company’s gains would be coming toward the end of the year. With the current forecasts sitting as they are before possible further reduction following Coinbase’s financial results coming up in May, stock had better start growing halfway through 2022 because it’s got 46% to go before meeting its estimate.
Comparative Prospects For Ethereum
Even though all cryptocurrencies are experiencing a challenging 2022, the best performing crypto asset this year is Ethereum. Experts such as Bloomberg analyst Mike McGlone believe that ETH could end the year at between $4,000 and $4,500. At the time of writing, Ether was trading at $2952.96, which implies gains of 26% to $35 by the end of the year. That’s far better than any crypto stocks look capable of offering, even if markets turn soon. Ethereum is also benefiting from the upcoming Ethereum 2.0 merge, whereby the mainnet merges with ETH 2.0’s Beacon Chain. As the date grows closer, Ethereum grows in value and ‘The Merge’ itself is largely forecast to forespell immense growth for Ethereum as it becomes no longer reliant on mining.
Comparative Prospects For Binance Coin
Despite Binance’s stock suffering, there are still good prospects on the cards for Binance Coin during 2022. While a rebound of crypto will inadvertently translate to a rebound of crypto stock as well, the growth in returns gained won’t be as profound when opting for share-based investment instead. Binance Coin has a gigantic 24-hour trading volume of approximately $1.37 billion as of the last week in April 2022. After gaining 10.39% year-to-date, BNB was trading at $404.85. A bullish trend prevails, carrying Binance Coin even higher. At its current price, when Bitcoin and Ethereum start to surge, it is quite likely that we’ll see BNB reaching pre-COVID levels. When this occurs, Binance stock will climb but not at quite the same rapid rate as the company’s crypto-asset itself.
Crypto Stocks Investors Should Buy In The Dip
There are certain stocks that the majority of investors feel are too big to fail completely. Companies like Riot Blockchain, Marathon Digital Holdings, and Bit Digital are trading so cheap that they’re almost impossible to ignore. The current taxing time for cryptocurrency and crypto stocks could just be the dip that keen investors need to ride a steep climb to returns of many multiples. Investing is, however, extremely risky, but if markets turn and the Crypto Fear & Greed Index finally switches from the last few weeks of extreme fear to greed, indicating an upward trend, the gains could be huge. In this case, crypto stocks would represent a slightly lower risk than crypto, but even this could be considered negligible when one looks at how tech stocks, in general, have been tanking lately.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only