Why Bitcoin, Coinbase and Silvergate Capital are declining today A colorful fool

What happened

Cryptocurrencies and cryptocurrency-related stocks have risen today after recovering in the last few days and as the market has continued to worry about the future of the economy.

In the last 24 hours, the price of the world’s largest cryptocurrency, bitcoin (BTC -4.10%), has dropped by about 5% to today 12:55 ET. Meanwhile, the stock of large cryptobourses Coinbase Global (COIN 3.67%) trades more than 12% lower, while the cryptobank Silvergate Capital (AND 4.23%) fell by almost 10%.

so what

Bitcoin rebounded over the weekend and earlier this week, with some investors looking to the bottom. At one point the price of bitcoin rose back to more than $ 32,000, but today bitcoin is back to about $ 30,300, at the time of this writing. Because Coinbase and Silvergate Capital operate in the crypto-industry, they are likely to always have at least some correlation with the price of bitcoin.

Investors seemed frightened today after Jamie Dimon, the company’s CEO JPMorgan Chasethe largest bank in the US, warned of potentially difficult economic prospects yet to come.

“We’re getting ready,” Dimon told today’s conference. “It’s a hurricane. The hurricane is right there, down the road, approaching us. We don’t know if it’s a small storm or if it’s Superstorm Sandy.”

Dimon has in mind the problems caused by the ongoing Russian invasion of Ukraine and higher oil prices. Dimon also said he was concerned about the declining number of public companies and the fact that we were “driving public companies out of the market.”

In other reports, the famous short-seller Jim Chanos focused on Coinbas and continued to warn that the shares would fall. In a recent podcast, Chanos called Coinbase “hugely overvalued” and said he expected the company’s fees for business to drop significantly.

“Brokers losing money if you witness Robin Hoodare generally traded at one to one and a half times the tangible book value [per share]”Coinbase is currently trading close to 300% or three times the tangible book value, so if Chanos is right, it means Coinbase shares may still have a long way to go.

What now

I would not be surprised with such uncertainty in the economy if I saw greater volatility between cryptocurrencies or the stock market. Some analysts believe that bitcoin could still fall sharply, to $ 14,000, which would obviously be difficult for the rest of the crypto-industry.

But I still think that bitcoin will stay here and will be a good buy at current levels in the long run. For this reason, I am also optimistic about Coinbas. Chanos has several good sides, but in the long run, if bitcoins and cryptocurrencies remain, I expect the volume of cryptocurrency trading to be much larger and Coinbase still probably the most trusted broker among retailers.

Silvergate Capital tends to cluster in cryptocurrency sales, but it’s my favorite crypto stock because it’s also a bank. Silvergate has created a real-time trading platform for institutional investors and crypto-exchanges. The business model brings a lot of deposits from which the bank does not pay any interest and which it can invest in higher-yielding assets. As a result, Silvergate is a huge recipient of rising interest rates.

If the price of bitcoin falls to a very low level, it could damage the inflow of deposits on Silvergate, but overall, I still think the bank has a great long-term use case and great long-term potential.