Why Shares of Coinbase, Marathon Digital Holdings, and HIVE Blockchain Technologies were down on Friday

Why Shares of Coinbase, Marathon Digital Holdings, and HIVE Blockchain Technologies were down on Friday

 

What happened

 

Cryptocurrencies and most crypto companies share price nose-dived on Friday morning, as investors assessed the macroeconomic outlook and tried to understand how hawkish the Federal Reserve will be.

 

Over the past 24 hours, the price of the worlds largest Cryptocurrency, Bitcoin (BTC), traded 8.6% lower and for below $21,400.

 

Also Read: Insider Trading Was Common At Coinbase Exchange, A New Study Argues

 

Share price of the largest Cryptocurrency Exchange platform Coinbase (COIN) traded more than 9% lower at 10:49 a.m. ET on Friday. Shares of the Bitcoin mining firms Marathon Digital Holdings (MARA) and HIVE Blockchain Technologies (HIVE) traded roughly 13% and 15.5% lower, respectively.

 

So, what

 

Share and Digital Assets price have had much more correlation this year, as high inflation and the Feds ongoing interest rate increase have crushed both asset classes in this year is slump. In addition, the Fed has started to squeeze liquidity out of the economy in an effort known as Quantitative easing, which has also alarmed investors. But there did not seem to be an obvious reason for the huge drop in major cryptocurrency prices on Friday morning.

 

Also Read: Coinbase Stock Rebound Obscures Market Share Loss To Peers

 

Simon Peters of the investment firm eToro said on Friday morning that "US equity markets have pulled back since 17^th August release of the July Fed meeting minutes, the key takeaway being that the Fed probably will not be finished with interest rate increases until inflation is tamed across the board, with no guidance offered on future interest rate hikes either"

 

 

Peters further added that "the trend has also perhaps been aggravated by [the] liquidation of long positions on bitcoin perpetual futures markets."

 

Digital Currencies have not coped well as rising rates make risk free assets like U.S. Treasury bills yield more attractive, making riskier assets across the board less appealing.

 

Also Read: Coinbase Exchange Faces SEC Investigation Over Its Crypto Listings

 

Additionally, BTC went on a huge run in 2021, which made it look like a lot of growth stocks that had valuations over the moon toward the end of last year. It is very hard to value digital currencies, but investors probably thought BTC had run up too far too quickly. The longer the Fed has to keep increasing interest rates, the longer there is likely to be pressure on the Digital Currency Market.

 

After new data for July 2022 showed that inflation could be peaking, investors hoped that the Fed could ease up on its aggressive stance and slow the pace of interest rate hikes.

 

Also Read: A Detailed Guide To The Coinbase Account Recovery

 

But in recent days, the Fed has indicated that it still likely has plenty of work left to do to get inflation to a more manageable level. Until then, the Fed will probably continue with interest rates hikes for some time, which increases the probability it might also tip the economy into a more severe recession. San Francisco Federal Reserve president Mary Daly recently mentioned that she expects interest rate hikes to continue into 2023 at the very least.

 

Now what

 

Coinbase, Marathon, and HIVE share prices trade with a high positive correlation to the price of BTC and the Cryptocurrency Market because their operating models all depend on cryptocurrency activity and market sentiment.

 

Also Read: How To Unlock A Restricted Coinbase Account?

 

Coinbase Exchange needs consumers and businesses to trade crypto, which it collects commissions and transaction fees on. And then Marathon and HIVE mine BTC, so the value of BTC majorly determines their perspective values.

 

Crypto Analysts think BTC will ultimately head higher over the long term but could be very volatile and experience pressure in the short term. Analysts also have not completely given up on Coinbase Exchange and think there is long-term potential in its operating model, but the Crypto Exchange platform has a lot of work to do to diversify its revenue base.