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Is it Time to Invest in Crypto Stocks?
Stock Analysis & Ideas

Is it Time to Invest in Crypto Stocks?

The cryptocurrency market has been volatile since the start of 2022, causing jitters across the digital token space.

The two largest cryptocurrencies by market cap, Bitcoin and Ethereum, have lost up to half of their value since peaking in late 2021, while some other digital assets have suffered even worse. To be more specific, Bitcoin has lost 13% of its value year-to-date, while Ethereum has lost 18%, and the crypto market as a whole is down 16% since the beginning of the year.

Federal Reserve tapering, rising interest rates, and regulatory crackdowns have weighed on the crypto market.

Unfortunately, shares of companies trading in the cryptocurrency space have fared even worse than the coins themselves, with some losing as much as 60% of their value since the beginning of the year. According to JPMorgan, the overall market valuation of publicly traded crypto stocks has dropped to around $60 billion from $100 billion in November.

Let’s discuss two of these publicly traded crypto stocks that have recently been harmed by the declining crypto market.

Coinbase (COIN)

Coinbase is one of the best-known cryptocurrency exchanges in the U.S. The company’s platform is used to buy popular cryptocurrencies like Bitcoin and Ethereum, as well as other digital assets.

Revenues are mostly derived from the fees it charges clients for trading cryptocurrencies via its online trading platform. Notably, Coinbase had an average daily trade volume of $4 billion in January, according to statistics from analytics firm Nomics.

Regrettably, things have changed. Trade volumes have dropped dramatically and have barely averaged $2.6 billion in daily trading volume so far in April. In addition, the stock has dropped nearly 40% year-to-date and 52% in the last six months.

As a result, Oppenheimer analyst Owen Lau decreased his price target to $314 from $377 due to lower trading volume expectations. The analyst notes that Coinbase is not having a good start to the year.

However, Lau maintained his Buy rating on the stock, believing that the “bear thesis is way overblown and that this creates an opportunity for long-term investors to get into one of the most disruptive companies in the market at what we see as a very attractive valuation.”

All said, Wall Street is cautiously optimistic about Coinbase stock, with a Moderate Buy consensus rating based on 12 Buys, two Holds, and two Sells. As for price targets, the average COIN price target of $292.33 implies almost 93.3% upside potential from current levels.

Riot Blockchain (RIOT)

Riot is a Bitcoin mining firm. The Bitcoin network is supported by the company’s rapid expansion of large-scale mining in the United States. So far this year, the stock has lost nearly 35% of its value.

Last month, Riot reported total annual revenues of $213.2 million, jumping 1,662% from the prior year. However, the company recorded a net loss of $7.9 million for Fiscal 2021.

In addition, the corporation disclosed that in March 2022, it produced 511 Bitcoins, an increase of 176% year-over-year.

RIOT’s stock price may continue to fall in 2022 due to geopolitical tensions, rate hike fears, and investors becoming more risk-averse.

According to TipRanks’ Stock Investors tool, 0.5% of the investors holding portfolios on TipRanks have decreased their stake in RIOT stock in the last 30 days.

However, Riot Blockchain stock commands a Strong Buy consensus rating based on four Buys and one Hold. As for price targets, the average RIOT price target of $46.40 implies almost 211.8 % upside potential from current levels.

Wrapping it Together

Cryptocurrencies have remained volatile, with top digital assets such as Bitcoin and Ethereum experiencing huge up-and-down swings. It’s tough to forecast where things will go in the long run, but given the rising interest rate and uncertain macro environment, trading in crypto-related equities could be a risky proposition for the time being.

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