Text size
Bitcoin has fallen 10% in 24 hours.
Dreamstime
A bearish market in Bitcoin may form, which may contribute to the sale of some high-flying stocks, if not the broader market.
Tesla
(ticker:
Tesla
),
PayPal Holdings
(PYPL), i
Square
(
Square
), to name just a few, are listed in closer correlation with the digital currency. Tesla has recently bought US $ 1.5 billion worth of digital currency and said it plans to accept it as payment, fueling an increase in its shares.
Shares with strong growth are under pressure due to fears of rising interest rates and bond yields, which reduce the current value of future cash flows. Tesla and online payment stocks are also crowded operations, making them vulnerable to sales.
PayPal Holdings
and Square are becoming digital currency brokers, allowing consumers to buy and store Bitcoin in their apps, with the goal of allowing people to use it for shopping.
Stocks have been sliding as Bitcoin has fallen freely. Digital currency was recently trading at around $ 47,300, 10% less in the last 24 hours and 18% less than the highs around $ 58,000 on February 21, according to CoinDesk.
Falling Bitcoin prices can help drag the whole thing down
Nasdaq Composite
Index, which fell 2.5% on Monday and fell 2.2% on Tuesday.
The liquidation of Bitcoin may have been delayed after the rise in recent months, and may have received a boost from Treasury Secretary Janet Yellen. He labeled Bitcoin as an “inefficient” currency and warned it could be a sign of speculative excesses, in an interview published Tuesday by the New York Times.
Traders seem to take Yellen’s comments as a sign that Biden administration regulators may be erecting more regulatory barriers to cryptography, making it more difficult for banks and brokers to offer trading services in digital currencies.
He
Nasdaq Composite
and other capitalization indices may be more tied to Bitcoin as the list of companies involved in crpyto technology or services expands. It now includes the chip maker
Nvidia
(NVDA), the Internet retailer
Overstock.com
(OSTK), and banks as
Signature bank
(SBNY). Exchanges and brokerages such as
CME Group
(CME),
Cboe Global Markets
(CBOE) and Interactive Brokers (IBKR) are also becoming cryptocurrencies as they expand trading in options and futures contracts related to digital currencies.
Tesla’s push toward Bitcoin was a vote of confidence in cryptography, but it may also have made Tesla a representative of the currency, fueling an exodus of shares from investors who wanted a carmaker, not a work of cryptography.
“Through Musk and Tesla embracing Bitcoin aggressively (from a transactional perspective as well), investors are beginning to tie Bitcoin and Tesla to the hip,” analyst Dan Ives of Wedbush Securities wrote in a note on Tuesday, in reference to Tesla CEO Elon Musk.
The rise of Bitcoin has also worked wonders for stocks that were left dead. Excess stocks, for example, rose 850% from $ 2.50 to $ 85 last year, including a 77% increase this year. The company has built a portfolio of blockchain and crypto-companies under its Medici Ventures division. He now plans to turn this unit into a corporation called the Pelion Venture Partners Fund.
Overprinting fell 10% on Tuesday, continuing the fall of the last few days as Bitcoin prices fell.
The impact of Bitcoin is being felt strongly in PayPal and Square. Companies earn transaction fees for cryptocurrencies and appear to increase customer involvement and revenue per user, compared to customers who are not involved in cryptography.
Neither company makes much profit from Bitcoin so far and currency-related transactions contribute minimally 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 factor, but it’s a useful tool for getting customers to engage more,” he says. “Because there are more people dedicated to apps, they use their digital wallets more often and spend more money on the ecosystem.”
In fact, applications could be driven for Bitcoin to become popular. This, in turn, has fueled the excitement for the actions.
But now they are pairing up with Bitcoin. PayPal shares fell 6% on Tuesday to $ 258 and fell 15% in the last five sessions, from a record high of about $ 305.
Square, which reported earnings after Tuesday’s close, fell 7% to $ 248, 9% less than its record high of $ 272.75 on Feb. 12.
The total value of Bitcoin remains formidable at close to a trillion dollars. The blockchain technology behind it is being adopted in banks and other financial companies.
JPMorgan Chase
(JPM)
Citigroup
(C), i
Wells Fargo
(WFC) have all invested in blockchain. The custody bank
Bank of New York Mellon
recently announced that it would maintain, transfer and issue cryptography for asset management clients.
There are more banks that want to offer encryption services
bank of america
in a report Tuesday, but they are waiting for Washington’s guidance. It may be some time before investors see any impact on their profit and loss accounts, but especially if the Bitcoin bubble now bursts.
Write to Daren Fonda at [email protected]