Bitcoin’s bear market may be forming, and if it is not a larger market, it may lead to the sell-off of some high-rise stocks.
) (Just to name a few) has a higher degree of association with digital currencies. Tesla recently purchased $1.5 billion in digital currency and said it plans to accept payment as a method of payment, which will drive its stock price to soar.
Fears of rising interest rates and bond yields put pressure on high-growth stocks, which reduces the present value of future cash flows. Tesla and online payment stocks are also crowded, making them vulnerable to sell-offs.
And Square is becoming a digital currency broker, enabling consumers to buy and store Bitcoin on its app, with the aim of eventually allowing people to use it to make purchases.
As Bitcoin’s free fall, stocks have been falling. According to CoinDesk’s data, the most recent transaction price of the digital currency is approximately US$47,300, a 10% drop in the past 24 hours, and an 18% drop from the February 21 high of US$58,000.
Bitcoin price drop may help drag down the broader market
Nasdaq Composite Index
The index fell 2.5% on Monday and 2.2% on Tuesday.
The Bitcoin sell-off may be overdue after the surge in the past few months, and it may have been helped by Treasury Secretary Janet Yellen. In an interview with The New York Times on Tuesday, she labeled Bitcoin as an “inefficient” currency and warned that it could be a sign of excessive speculation.
Traders seem to be accepting Yellen’s remarks, which indicates that the Biden administration’s regulatory agencies may set more regulatory barriers for cryptocurrencies, which makes it more difficult for banks and brokers to provide digital currency commercial services.
Nasdaq Composite Index
As the roster of companies involved in crpyto technology or services expands, other large-cap stock indexes may be more closely linked to Bitcoin.Now includes chip manufacturers
(NVDA), Internet retailer
(OSTK), and things like
(SBNY).Exchanges and brokers, for example
Cboe Global Market
(CBOE) and Interactive Brokers (IBKR) are also turning into crypto bets as they expand trading in digital currency-related options and futures contracts.
Tesla’s entry into Bitcoin is a vote of confidence in the cryptocurrency, but it may also have made Tesla an agent of the currency, provoking an outflow of stocks that want automakers instead of cryptocurrency investors.
“Through Musk and Tesla actively embrace Bitcoin (from a trading perspective), investors have also begun to tie Bitcoin and Tesla together,” Wedbush Securities analyst Dan Ives said in Tuesday A report wrote that it was referring to Tesla CEO Elon Musk.
Bitcoin’s surge has also caused miracles for those dead stocks. For example, in the past year, the backlog has surged 850% from US$2.50 to US$85, of which this year has increased by 77%. The company has established a portfolio of blockchain and crypto companies under its Medici Ventures division. Now, it plans to convert the division into a limited partnership called Pelion Venture Partners Fund.
The backlog dropped by 10% over the past few days due to the plunge in Bitcoin prices.
In PayPal and Square, the influence of Bitcoin is greatly felt. These companies earn transaction fees through the use of cryptocurrency, and they seem to be increasing customer engagement and revenue per user compared to customers who do not participate in crypto.
So far, neither company has made much profit from Bitcoin, and transactions involving this currency have contributed little to revenue. Wolfe (Wolfe) analyst Darrin Peller estimates that Bitcoin contributes less than 1% to PayPal’s revenue and slightly more to Square.
He said: “This is not the main driver of revenue, but it is a useful tool to increase customer engagement.” “As more people use these apps, they will use their digital wallets more frequently. , And more money enters the ecosystem.”
Indeed, these applications may become channels for Bitcoin to become mainstream. In turn, this has stimulated interest in stocks.
But they are now going hand in hand with Bitcoin. PayPal’s share price fell 6% on Tuesday to $258, and has fallen 15% from a record high of $305 in the past five trading days.
Square released its financial report after the close on Tuesday, which was 9% lower than the closing high of US$272.75 set on February 12 to US$248.
The total value of Bitcoin is still close to $1 trillion. Banks and other financial companies are accepting the blockchain technology behind it.
(WFC) has all invested in blockchain.Custodian bank
Bank of New York Mellon
It was recently announced that it will hold, transfer and issue cryptocurrencies for asset management clients.
Point out that more banks are eager to provide encryption services
Bank of America
In the report on Tuesday, but they are waiting for guidance from Washington. However, it may take a while for investors to see any impact on their income statement, especially if the Bitcoin bubble is now bursting.
Write to Daren Fonda (firstname.lastname@example.org)