Crypto stocks have fallen sharply: is it worth investing now? | 20/06/22

• Decline and gloom in the crypto market – cyber currencies and cryptocurrencies under pressure
• Numerous negative factors lead to divestment
• Low prices Opportunity to get started?

The crypto market is in a doomed mood right now. After setting new records in late 2021, 2022 has been steadily downhill so far. However, cryptocurrencies were punished even more severely than the actual cyber currencies. For while Bitcoin has lost about 55 percent since the beginning of the year, Coinbase paper has fallen nearly 80 percent. And the crypto platform is by no means alone about this. The Bakkt share has fallen about 75 percent this year, and the bitcoin mining company Marathon Digital has fallen about 80 percent (as of June 16, 2022). In light of this discrepancy, the question arises as to whether cryptocurrencies are not already oversold and the low prices can be used to get started.

Many stressors

Various factors are responsible for the downturn. As a result, global inflation is at a very high level, which is now tightening monetary policy led by central banks. Liquidity is withdrawn from the markets, which puts pressure on the company’s sales and earnings. In addition, the macroeconomic environment is also blurred. High energy prices weigh on national economies, which e.g. has led the OECD to downgrade its growth prospects for the global economy. A lot of experts and economists even expect a recession. Against this background, investors shy away from risk and increasingly part with more risky assets such as cryptocurrencies and equities. “Crypto fans are used to volatility, but these roller coaster rides are getting harder to digest. Now that the era of cheap money is coming to an abrupt end, traders are becoming much more risk-averse and turning their backs on crypto assets,” comments Hargreaves. ‘Susannah Streeter Lansdown versus Bloomberg.


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Hard to make a forecast

It is therefore difficult to predict whether the downward trend in cryptocurrencies will continue for a longer period of time or whether a bottom has now been found. Oanda analyst Ed Moya told Bloomberg: “The sentiment for cryptocurrencies is terrible as global crypto market value has fallen below $ 1 trillion. Bitcoin is trying to find a bottom, but when prices break below 20 ‘If the $ 000 level falls, it could be even more uglier. ”

A look at P / E

When asked about the situation with cryptocurrencies, it is worth taking a look at the relationship between price and earnings (P / E). This is calculated by dividing the market price by earnings per share. shares. This metric helps identify whether a business is currently valued low and high. Generally, a P / E ratio of 20 or more is considered to be overvalued, below which a stock is considered to be cheap. However, if the price-to-earnings ratio is negative, it means that the valued company is in the red. If you now look at various crypto shares, it quickly becomes clear that the P / E ratio does not speak for an entry here. This results in negative price earnings for Marathon Digital and Bakkt. Only Coinbase shares have a positive P / E ratio of 4.53 (as of 14 June 2022).

Beware of mining stocks

A look at various cryptocurrencies also reveals that shares in mining companies are coming under particular pressure in the current environment with high energy prices, high inflation and rising key interest rates. Finally, they risk that the energy-heavy mining of Bitcoins will become unprofitable during the skyrocketing electricity prices. For this reason, several mining companies have already been forced to dispose of their BTC holdings in recent months in order to cover their operating costs. These companies also suffer from the fact that they have no pricing power and depend solely on the prices of cyber currencies. So you can not pass on higher costs to the customers.

This should also be remembered by investors who are not directly invested in cryptocurrencies or cryptocurrencies but instead rely on Bitcoin ETFs. For these often consist largely of the very Bitcoin exploration companies that BTC-ECHO points out. This can prove to be an option if the mood in the market reverses and things start to pick up again. However, as no one knows when this will happen, there is also a risk that a mining company will not be able to hold out before this time, but will go bankrupt before then.

Be careful when entering

According to BTC-ECHO, anyone who plays with the idea of ​​using the currently low prices to (re) enter cryptocurrencies should move on in small steps first, ie. expand investment in tranches. Nevertheless, it should always be remembered that the mood in the crypto market is even more dependent on market psychology. This means that if things go down, panic sales happen faster, but on the other hand, it can also go up disproportionately if the mood becomes positive. Ultimately, each investor must decide for himself whether it can be assumed that the current negative factors are already sufficiently priced in the prices. Strong nerves are required in any case.


This text is for informational purposes only and does not constitute an investment recommendation. GmbH excludes any claim for recourse.

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