The outlook for cryptocurrencies seems to change like the weather. Only a month ago, the whole world was bullish on crypto as a Bitcoin (BTC-USD) halving event approached, when the available supply of BTC that can be mined is reduced by 50%. Past halving events led to parabolic moves that increased crypto prices. Not this time. Since the halving event, Bitcoin’s price has slumped. After hitting an all-time high of around $74,000 in March, ahead of the halving, the price dropped to $58,000 in recent weeks.
The decline has led to a rethink of crypto. Investment bank Standard Chartered (LON:STAN), one of the biggest crypto bulls, now says that Bitcoin’s price could fall as low as $50,000. It had previously forecast that Bitcoin’s price would reach $100,000 by year’s end. In revising its price prediction, Standard Chartered pointed to the recent outflows in spot Bitcoin exchange-traded funds (ETFs) after several months of rapid inflows. The bank also noted that risk assets such as crypto are falling out of favor with investors as signs of slowing the U.S. economy.
Here is a stock market crash warning: don’t get caught holding these three blockchain stocks.
Block (SQ)
Payments firm Block (NYSE:SQ) has just unveiled a new dollar cost averaging program to add to its Bitcoin stake steadily. Block says it has begun using 10% of its monthly Bitcoin-related gross profit to buy even more BTC. It plans to carry out this plan for the remainder of 2024 and beyond. Block already has substantial exposure to Bitcoin, owning more than 8,000 tokens currently valued at $4.7 billion. Analysts and some investors have raised concerns about Block’s exposure to BTC, seeing it as a vulnerability.
Block CEO Jack Dorsey is a crypto bull, having renamed the company that used to be known as “Square” to reflect its growing focus on blockchain technologies. Block appears to be trying to allay people’s concerns about its BTC investments, unveiling as part of its earnings a new “Bitcoin Blueprint For Corporate Balance Sheets” in which the company outlines its process for buying Bitcoin and insuring and accounting for its crypto holdings. Still, nearly $5 billion of BTC is a lot for Block, a payments company.
MicroStrategy (MSTR)
If the crypto market crashes, MicroStrategy (NASDAQ:MSTR) will likely fall hardest. The company spent this year’s first quarter raising as much money as possible to buy as many Bitcoins as possible as the price of the biggest cryptocurrency rallied to an all-time high of just under $74,000 in mid-March. MicroStrategy CEO Michael Saylor is a crypto evangelist who kept buying Bitcoin in the lead-up to the halving event in April.
At last count, MicroStrategy owned just over 214,000 Bitcoins valued at about $13.5 billion based on the current price. While technically still a business intelligence software firm, Saylor has referred to MicroStrategy as a “Bitcoin development company.” Despite some handwringing among shareholders, Saylor said his goal is to accumulate as much Bitcoin as possible. Indeed, MicroStrategy continued buying BTC in this year’s first quarter even as the price trended up to record highs.
Coinbase (COIN)
It’s riding high now, but the fortunes of cryptocurrency exchange Coinbase (NASDAQ:COIN) will certainly turn if there’s a market crash. Coinbase has seen its earnings surge in recent months amid the crypto rally. The largest crypto exchange in the U.S. has benefitted from a big rise in crypto trading during this year’s first quarter as the price of Bitcoin hit a record. In Q1, the company’s earnings per share (EPS) rose an astounding 303% from a year earlier.
Consumer transaction revenue during Q1 of this year was up more than 100% from a year ago. Total transaction revenue tripled in the quarter to $1.08 billion. Coinbase performs well whenever Bitcoin and other cryptos rally, leading to increased trading volumes and revenue. The company also got a lift during Q1 of this year after the U.S. Securities and Exchange Commission (SEC) approved U.S. spot Bitcoin exchange-traded funds (ETFs).
However, should we experience another crypto winter, investors won’t want to be caught holding COIN stock. During the 2022 bear market, Coinbase’s share price fell 90%.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.