On Sep 21, the cryptocurrency market suffered a setback courtesy of the Fed. In its September FOMC meeting, the Fed kept the benchmark lending rate unchanged at the existing 5.25-5.5%, as stated on Sep 20. However, the post-FOMC statement of Fed Chairman Jerome Powell dampened market participants’ sentiments.
Although the Fed paused its rate hike in the September FOMC meeting, the current dot-plot has shown a strong likelihood of one more hike of 25 basis points in 2023. That will take the terminal interest rate of this hiking cycle to 5.6%, well above the 5.1% forecast in June. Notably, the current range of the Fed fund rate is the highest level since March 2001.
More importantly, the central bank said it would keep interest rates higher for a longer time period. The new projection has shown two maximum rate cuts in 2024 instead of four projected in June. The first cut in interest rate is not expected before September 2024.
As a result, the yield on the short-term 2-Year U.S. Treasury Note reached 5.202%, its highest level since 2006. This link is closely linked to the possibility of a near-term economic downturn. The yield on the benchmark 10-Year U.S. Treasury Note touched 4.494%, its highest level since 2007.
A higher market interest rate is detrimental to high-growth sectors like technology, consumer discretionary and cryptocurrency. Notably, the crypto space suffered a huge blow last year as the Fed pursued a rigorous interest rate hike regime.
Consequently, on Sep 21, prices of major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Dogecoin (DOGE) and BNB (BNB) slid 1.7%, 1.9%, 1.9%, 2.3% and 1.6%, respectively.
Stocks in Focus
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 18% over the last 60 days. HOOD currently carries a Zacks Rank #2 (Buy).
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 84.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 30% over the last 60 days. COIN currently carries a Zacks Rank #3 (Hold).
Block Inc. SQ is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. The users of Cash App can buy, sell, send and receive Bitcoin. In addition, SQ’s decentralized tbd platform allows developers to build decentralized finance applications to run on programmable blockchains. SQ is also one of the largest Bitcoin investors.
Block has an expected earnings growth rate of 69% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. SQ currently has a Zacks Rank #3.
Visa Inc. V is taking a significant step toward modernizing cross-border money movement. In a move aimed at enhancing the efficiency of global transactions, V is expanding its stablecoin settlement capabilities to the high-performing Solana blockchain. This expansion of V includes collaboration with prominent merchant acquirers Worldpay and Nuvei, marking a pivotal development in the world of digital payments.
Visa has an expected earnings growth rate of 15.3% for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. V currently carries a Zacks Rank #3.
PayPal Holdings Inc. PYPL operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. Its mobile wallet Venmo also allows users to buy and sell cryptocurrency. PYPL 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 Holdings has an expected earnings growth rate of 19.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 90 days. PYPL currently carries a Zacks Rank #3.
Visa Inc. (V): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Block, Inc. (SQ): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
Robinhood Markets, Inc. (HOOD): Free Stock Analysis Report
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