On Aug 8, cryptocurrencies surged following Moody’s Investors Service’s decision to downgrade the credit ratings of 10 small and mid-sized U.S. banks by a single notch. Moreover, the rating agency put six big banks under review for a potential downgrade. Moody’s also changed its rating outlook to negative for 11 banks.
The cryptocurrency market regained its lost glory this year after a highly disappointing 2022. A steady decline in the inflation rate and consequently the Fed’s decision to lower the magnitude of interest rate hike helped cryptocurrencies to regain pace. A high interest rate is detrimental to growth assets like technology stocks, consumer discretionary stocks and cryptocurrencies.
However, during the past month, cryptocurrencies were trading rangebound after the Fed’s decision to reinitiate rate hike in July following r a brief pause in the June FOMC meeting and the decision by Fitch Ratings to downgrade the U.S long-term foreign currency issuer default rating to AA+ from AAA. This resulted in a spike in yields of U.S. sovereign bonds.
Finally, on Aug 8, Moody’s decision created a turmoil in the U.S. banking sector acting as a positive surprise to the cryptocurrency market. Cryptocurrencies are generally recognized as an alternative to the banking sector. In March, cryptocurrencies soared 50-60% following the debacle of Silicon Valley Bank and Signature Bank.
On Aug 8, major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Dogecoin (DOGE) and Litecoin (LTC) advanced 1.9%, 1.5%, 2.1%, 1.6% and 1.9%, respectively. Notably, in the last 14 days, bitcoin was unable to move more than 1% in either direction.
Institutional Thrusts
The largest thrust for the crypto space has come from institutional investors. BlackRock Inc.’s (BLK) decision to launch a Bitcoin ETF and the decision of The Charles Schwab Corp. (SCHW)-led consortium to create a new crypto exchange called EDX Markets, have attracted several investors toward cryptocurrencies like Bitcoin, Ethereum and Litecoin to name a few.
The latest addition to this league is PayPal Holdings Inc. (PYPL), which has become the first major U.S. fintech company to offer its own crypto token with a dollar-pegged stablecoin known as PayPal USD.
PayPal USD is designed to contribute to the opportunity stablecoins offer for payments and is 100% backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents. PayPal USD is redeemable 1:1 for U.S. dollars and is issued by Paxos Trust Company.
Stocks to Watch
NVIDIA Corp. NVDA is a semiconductor industry giant and one of the biggest success stories of 2023. Being a leading designers of graphic processing units (GPUs), the NVDA stock usually soars on a booming crypto market. This is because GPUs are pivotal to data centers, artificial intelligence, and the creation of crypto assets.
NVIDIA’s expected earnings growth rate for the current year is 58.6% (ending January 2024). The Zacks Consensus Estimate for its current-year earnings has improved 1.7% over the last 30 days. NVDA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Robinhood Markets Inc. HOOD operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets has an expected earnings growth rate of 57.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 16.7% over the last seven days. HOOD currently carries a Zacks Rank #2 (Buy).
Shopify Inc. SHOP is an e-commerce company that allows merchants using its platform to accept cryptocurrencies as payment and has integrated with cryptocurrency payments processor CoinPayments.
Shopify’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for its current-year earnings has improved 6.7% over the last 60 days. SHOP currently has a Zacks Rank #2.
Coinbase Global Inc. COIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. COIN offers the primary financial account in the crypto space for consumers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions; and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
Coinbase Global has an expected earnings growth rate of 81.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3% over the last seven days. COIN currently carries a Zacks Rank #3 (Hold).
Hut 8 Mining Corp. HUT has recently merged with US Bitcoin Corp to increase its total hash rate substantially. HUT aims to increase its total hash rate to 9.8 EH/s.
Hut 8 Mining has an expected earnings growth rate of 50% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 90 days. HUT currently carries a Zacks Rank #3.
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Shopify Inc. (SHOP): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
Hut 8 Mining Corp. (HUT): Free Stock Analysis Report
Robinhood Markets, Inc. (HOOD): Free Stock Analysis Report
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