In August, trading is being seen in a limited range in the cryptocurrency market. This space is likely to remain off limits in the near future. Currently, cryptocurrencies are suffering from both positive and negative factors in equal weight. These factors are unlikely to allow this locus to tilt towards any specific direction.
The biggest push for the crypto sector has come from institutional investors. BlackRock Inc.’s (BLK) decision to launch a bitcoin ETF and the decision by a consortium led by Charles Schwab Corp. (SCHW) to form a new crypto exchange called EDX Markets have attracted many investors to cryptocurrencies.
The latest addition to this league is PayPal Holdings Inc. (PYPL), which has become the first major US fintech company to introduce its crypto token alongside a dollar-pegged stablecoin known as PayPal USD.
US banks are currently under rating watch. Moody’s Investors Service cut the ratings of 10 small and medium-sized US banks by one notch. In addition, the rating agency has placed six large banks under review for possible downgrade. Fitch Ratings warned that it could downgrade more than a dozen US giant banks in the near future.
In addition, S&P Global cut the credit ratings of some regional lenders with high commercial real estate exposure. Cryptocurrencies are generally recognized as an alternative to the banking sector. Hence, the turmoil in the banking sector is likely to boost cryptocurrencies.
Lastly, leading generic AI-based chipset developer – NVIDIA Corp (NVDA)’s FY24 Q2 blockbuster earnings results have boosted the crypto space. This is because its graphic processing units are vital for data centers, artificial intelligence, and the creation of crypto assets.
On August 25, at the Fed’s Jackson Hole Annual Policy Symposium, Chairman Jerome Powell warned that despite steady progress over the past year, the inflation rate remained excessively high. As a result, the central bank is set to hike interest rates further in the near future.
According to Powell, “We are prepared to raise rates further if appropriate, and intend to keep policy at a restrictive level until we are confident that inflation is on a sustained downward trend toward our objective.” “
High interest rates are detrimental to high-growth sectors such as technology, consumer discretionary, and cryptocurrencies. The crypto market debacle in 2022 was a result of the central bank’s aggressive rate hikes and tight monetary control policies.
In addition, yields on US sovereign bonds remain extremely high. The yield on the short-term 2-year US Treasury note rose to 5.076%. This yield is closely tied to the movement of the fed funds rate. The yield on the benchmark 10-year US Treasury note currently stands at 4.23%. The yield reached 4.35% on 21 August, the highest since November 2007.
Finally, the Wall Street Journal reported that SpaceX, the space travel company promoted by Elon Musk, cut the value of its bitcoin holdings by a total of $373 million in 2022 and 2021 and sold the cryptocurrency.
stocks to watch
Nvidia Corporation NVDA reported fiscal 2024 second quarter adjusted earnings per share of $2.70, exceeding the Zacks consensus estimate of $2.09. NVDA reported revenue of $13.51 billion for the quarter, beating the Zacks Consensus Estimate by 20.89%. This compared to revenue of $6.7 billion a year earlier. Management estimates third-quarter revenue to be $16 billion, compared with the Zacks consensus estimate of $12.34 billion.
NVIDIA’s expected revenue and earnings growth rates for the current year (ending January 2024) exceed 62.9% and 100%, respectively. The Zacks Consensus Estimate for current year earnings has improved by 12.8% over the past seven days. NVDA currently sports a Zacks Rank #1 (Strong Buy). you can see Full list of today’s Zacks #1 ranked 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 (BTC), ethereum (ETH), dogecoin (DOGE) and other cryptocurrencies using its Robinhood crypto platform.
Robinhood Markets’ estimated earnings growth rate for the current year is 57.3%. The Zacks Consensus Estimate for current year earnings has improved 18% over the past 30 days. HOOD currently holds a Zacks Rank #2 (Buy).
Coinbase Global Inc. COIN provides the financial infrastructure and technology for the crypto economy in the United States and internationally. COIN provides the primary financial ledger in the crypto space for consumers, a marketplace with a pool of liquidity for institutions to transact in crypto assets; and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
Coinbase Global’s projected earnings growth rate for the current year is 84.8%. The Zacks Consensus Estimate for current year earnings has improved by 21.7% over the past 30 days. COIN currently holds a Zacks Rank #3 (Hold).
PayPal Holdings Inc. PYPL operates a digital wallet and allows users to buy, transfer and sell cryptocurrencies including bitcoin, ethereum, bitcoin cash and litecoin. Users of PYPL can checkout and pay online merchants using crypto. Its mobile wallet Venmo also allows users to buy and sell cryptocurrencies. PYPL has become the first major US fintech company to introduce its crypto token alongside the dollar-pegged stablecoin known as PayPal USD.
PayPal Holdings’ expected earnings growth rate for the current year is 19.9%. The Zacks Consensus Estimate for current year earnings has improved 0.1% over the past 90 days. PYPL is currently ranked #3 on Zacks.
Interactive Brokers Group Inc. IBKR is a global automated electronic broker. IBKR executes, processes and trades cryptocurrencies. IBKR’s Commodity Futures trading desk also provides clients with the opportunity to trade in cryptocurrency futures.
Interactive Brokers Group’s estimated earnings growth rate for the current year is 39.3%. The Zacks Consensus Estimate for current year earnings has improved 0.2% over the past 30 days. IBKR is currently ranked #3 on Zacks.
The chart below shows the price performance of the above mentioned five stocks in the last three months.
Jax Investment Research
Image source: Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for Next 30 Days. Click to receive this free report
Interactive Brokers Group, Inc. (IBKR): Free Stock Analysis Report
Nvidia Corporation (NVDA): Free Stock Analysis Report
PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
Robinhood Markets, Inc. (HOOD): Free Stock Analysis Report
Click here to read this article on Zacks.com.
Jax Investment Research