Cryptocurrencies surged on Aug 8 after witnessing a slight slowdown following the Fed’s 25 basis point rate hike in the last week of July. Tuesday’s surge was largely triggered by the decision of Moody’s Investor Service to downgrade 10 small-to-medium-sized lenders and place six other banks on its review list for a potential downgrade.
The credit rating agency cited deposit risk, fears of an impending recession and struggling commercial real estate portfolios as the reasons for the downgrade. Besides, Moody’s also changed its rating outlook for 11 banks to negative.
Cryptocurrencies Rally
The crypto market has made a solid rebound this year after a disappointing 2022 that saw the market plummet by more than 65%. The freefall was primarily triggered by the FTX bankruptcy following a major fraud and the Tera Luna crash.
However, this year has been great and experts predict a cryptocurrency rally in the second half as macroeconomic conditions ease. Inflation has been steadily declining over the past 12 months, which saw the Fed lowering the magnitude of its rate hikes. This has been going in favor of the crypto market.
Growth assets such as consumer discretionary and technology stocks and cryptocurrencies are adversely affected by higher interest rates.
Cryptocurrencies have been on a rally since the beginning of 2023. The picture got rosier at the end of June and early July after the Fed left interest rates unchanged after 10 straight hikes. However, the rally came to almost a standstill after the central bank resumed its rate hike at the end of July and Fitch Ratings downgraded the U.S. long-term foreign-currency issuer default rating from AAA to AA+.
However, the announcement by Moody’s sent the cryptocurrencies on a rally once again on Tuesday, with all major cryptocurrencies including Bitcoin (BTC), Ethereum (ETH) and Dogecoin (DOGE) surging. Cryptocurrencies are widely considered an alternative to traditional banking systems.
Crypto Market Poised to Grow
One of the major reasons behind the growing faith in cryptocurrencies is the renewed interest exhibited by prominent traditional financial institutions, particularly in Bitcoin. This has been a driving force behind the upward trajectory of Bitcoin’s prices.
Notably, financial giant BlackRock, Inc. BLK has taken steps by submitting an application to regulators to create a Bitcoin ETF. Should this proposal receive approval from regulatory authorities, it could lead to increased involvement from retail investors and offer avenues for expanded institutional support.
Likewise, other major players, including The Charles Schwab Corporation SCHW, Citadel Securities and Fidelity Digital Assets, have backed the launch of a new cryptocurrency exchange named EDX Markets. This exchange facilitates the trading of Bitcoin as well as other prominent digital assets.
The latest to jump onto the bandwagon is PayPal Holdings Inc. PYPL, which earlier this week became the first major U.S. fintech company to introduce its unique cryptocurrency token, in the form of a dollar-pegged stablecoin, named PayPal USD.
Our Choices
From an investment perspective, taking advantage of the current upward trend of cryptocurrencies can be seen as a prudent decision.
Riot Platforms, Inc. RIOT is a Bitcoin-driven infrastructure platform. RIOT is a Bitcoin mining and digital infrastructure company focused on a vertically integrated strategy.
Riot Platforms’ expected earnings growth rate for next year is 38.9%. Shares of RIOT have gained 42.8% in the past three months. Riot Platforms presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NVIDIA Corporation NVDA is a major player in the semiconductor industry and has been one of the standout success stories of 2023. As a leading designer of graphic processing units (GPUs), the value of NVDA stock tends to surge during a thriving crypto market. This is primarily due to the crucial role GPUs play in data centers, artificial intelligence, and the mining or production of cryptocurrencies.
NVIDIA’s expected earnings growth rate for next year is 133.2%. Shares of NVDA have gained 48.9% in the past three months. NVIDIA currently sports a Zacks Rank #1.
Coinbase Global, Inc. COIN offers financial infrastructure and technology to support the global cryptocurrency economy. COIN provides a main financial account for consumers in the crypto space, a marketplace with liquidity for institutional crypto asset transactions, and technology and services for developers to build crypto-based applications and accept cryptocurrencies securely as payment.
Coinbase Global’s expected earnings growth rate for the current year is 84.78%. Shares of COIN have increased 40.1% over the past three months. Coinbase currently has a Zacks Rank #2.
BlackRock, Inc. (BLK): Free Stock Analysis Report
The Charles Schwab Corporation (SCHW): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Riot Platforms, Inc. (RIOT): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
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