Here’s What You Missed In Crypto This Week

The Fly

Contributor:
The Fly
Visit: The Fly

Coinbase to slow hiring as MicroStrategy CFO sees no change to bitcoin plans

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

COINBASE TO SLOW HIRING, REASSESS HEADCOUNT NEEDS: 

Coinbase (COIN) announced Monday that it will “slow hiring and reassess our headcount needs” during the market downturn, after initially planning to triple its workforce in 2022. Emilie Choi, president and COO, said in a blog post that the changes are not expected to have any material impact to the previously communicated expense outlook for Q2, or FY22. Choi said: “Given current market conditions, we feel it’s prudent to slow hiring and reassess our headcount needs against our highest-priority business goals. Headcount growth is a key input to our financial model, and this is an important action to ensure we manage our business to the scenarios we planned for, specifically the potential Adjusted EBITDA we are aiming to manage to… Big picture: We know this is a confusing time and that market downturns can feel scary. But as we said at last week’s Town Hall, we plan for all market scenarios, and now we are starting to put some of those plans into practice. We’re in a strong position – we have a solid balance sheet and we’ve been through several market downturns before, and we’ve emerged stronger every time.”

Additionally on Tuesday, Coinbase stated in a corporate blog post: “As crypto asset prices fluctuate, the base and quote order size limits on our Exchange can diverge in notional terms. We try to keep up with the market by updating these limits on a regular basis, but we realize the frequency of the changes can lead to customer confusion. Instead of maintaining both base min order size and quote min order size, we are changing our size limits to consider simply the notional value of the order submitted to our exchange… Pursuant to this change, we will deprecate the base min order size variable from our market parameters. We will maintain the quote min order size limit as the check on notional. The check will apply to all orders where funds in the quote currency are specified… We set our max order size limits on a per-order book basis, considering depth of order book within 500bps over recent time periods, in order to protect our clients from submitting single large-sized orders that would move the market significantly… Meanwhile, our price protection points are a dynamic, real-time defense against significant price movements caused by a single order, and are set more conservatively to guard against slippage than our max order size limits. For this reason, we believe our price protection points better serve our clients and have decided to remove our static max order size limits.”

Mizuho analyst Dan Dolev kept a Neutral rating on Coinbase on Thursday after surveying bitcoin traders on the company’s platform. Per the survey, the average investor’s bitcoin cost basis is $21,000. If this is true, it means that the more bitcoin nears such levels, the closer the average investor gets to the break-even point, Dolev said. On a positive note, nearly 50% of those surveyed reported no intention to sell bitcoin irrespective of how low it goes, said the analyst. For the remaining 50%, the tipping point is about $9,000, he added.

MICROSTRATEGY WON’T CHANGE BITCOIN PLANS: 

MicroStrategy’s (MSTR) new CFO Andrew Kang has said the company’s strategy to buy and hold bitcoin won’t change despite the recent large selloff, The Wall Street Journal’s Mark Maurer reported Wednesday. As of March 31, MicroStrategy claimed to hold $2.9B of the cryptocurrency in book value and has bought 129,218 bitcoins to date. “At this time, we do not have any intention to sell,” said Kang. “There are no scenarios that I’m aware we would sell.” Kang claims there has not been any pressure from shareholders to sell more and added the company will continue to monitor bitcoin prices. “Some of the more recent volatility was certainly around some of the activity outside of bitcoin,” Kang said. “For us, we monitor that from a market perspective, but there anything fundamental to bitcoin that we believe presents any issues against our strategy.”

On Monday, Jefferies analyst Brent Thill kept a Hold rating on MicroStrategy saying the shares are down 50% this month as investors have been concerned about its $2.4B in leverage. He believes MicroStrategy does not face liquidity risk as it has enough free cash flow to cover debt interest and does not face solvency risk as it can use additional bitcoins for collateral to avoid a margin call in the near-term. Management needs to focus on the core business that declined 3% in Q1 said Thill, who remains on the sidelines pending better execution.

SIGNATURE BANK PRICE TARGETS LOWERED: 

Raymond James analyst David Long lowered the firm’s price target on Signature Bank (SBNY) on Monday and kept a Strong Buy rating on the shares. The recent stock price underperformance for shares is overdone, Long said, and while the bank has exposure to the digital currency ecosystem as the leading depository bank, he sees little EPS risk for Signature even in the worst-case scenario where the bank faces material deposit run-off.

Meanwhile, Piper Sandler analyst Mark Fitzgibbon lowered the firm’s price target on Signature Bank on Friday and kept an Overweight rating on the shares. As one of the largest players in the digital payments space, Signature Bank has certainly benefited from the development of the crypto space, Fitzgibbon said. The analyst said Signature doesn’t really have credit exposure to crypto and that its shares look inexpensive at current levels.

VOYAGER DIGITAL PRICE TARGET LOWERED: 

Craig-Hallum analyst George Sutton lowered the firm’s price target on Voyager Digital (VYGVF) on Tuesday and kept a Buy rating on the shares. With the stock already down over 75% year-to-date, the board decided to raise capital at a 25% discount in the name of liquidity, and while the investor base involved is great, it comes at an expense to the current shareholder base, Sutton said.

GOLDMAN SEES LITTLE IMPACT ON HOUSEHOLD WEALTH FROM CRYPTO CRASH: 

Goldman Sachs chief economist Jan Hatzius said in a Thursday note to investors that his “rough estimate” is that U.S. households own about one-third of the global crypto market and the recent decline for major cryptocurrencies, which have fallen in value from $2.3T late last year to $1.3T now, is “very small” relative to U.S. household net worth. He expects any drag on aggregate spending from the recent declines to be “very small as well.” Hatzius added that he sees “very limited scope” for an increase in labor force participation due to crypto price declines, because crypto holdings are such a small share of household wealth and because the labor force participation rate of younger men has already fully recovered to its pre-pandemic level. Though Hatzius thinks declines in household wealth may incentivize some workers that left the labor market during the pandemic to return, he argued that any incremental impact from the recent declines in cryptocurrency prices will “likely be modest.”

CRYPTO STOCK PLAYS: 

Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.

PRICE ACTION: 

As of time of writing, bitcoin rose about 1% this week at $30,336 in U.S. dollars, according to TradeBlock.

Originally Posted May 20, 2022 – Here’s What You Missed in Crypto This Week

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from The Fly and is being posted with permission from The Fly. The views expressed in this material are solely those of the author and/or The Fly and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Digital Assets

Trading in digital assets, including cryptocurrencies, is especially risky and is only for individuals with a high risk tolerance and the financial ability to sustain losses. Eligibility to trade in digital asset products may vary based on jurisdiction.