Why Coinbase, Silvergate Capital, and Riot Blockchain Stocks Are Rising Today


What happened

Shares of several crypto stocks are rising today after a strong weekend for Bitcoin (BTC), which appears to be rising on investors’ belief that inflation has peaked. As of this writing, the price of Bitcoin has risen 4.4% in the past 24 hours.

Big Crypto Exchange Stocks Coinbase (PIECE OF MONEY 3.20%) were trading about 6.5% higher at 11:15 a.m. ET today. Crypto bank stocks Silvergate Capital (IF 0.83%) were trading more than 3% higher, and shares of the Bitcoin miner Riot Blockchain (RIOT 7.13%) were trading almost 9% higher.

So what

Investors are bracing for new inflation data this week that could show inflation has peaked, at least to some extent. On Wednesday, the US Bureau of Labor Statistics (BLS) will release the latest reading of the Consumer Price Index (CPI), which tracks the prices of a wide range of everyday consumer goods and services. Investors use the CPI as a key way to measure inflation.

Image source: Getty Images.

In June, the CPI rose 9.1% year-on-year, beating economists’ expectations and showing that the economy remained strong. But in that figure was a huge increase in energy and gas prices, which we know went down in July. That’s why investors are betting that the CPI will drop in July when the data comes out on Wednesday. Economists currently forecast the CPI to rise 8.9% year-on-year in July.

Inflation has been a headache for crypto holders for a long time now, as it sparked a hawkish Federal Reserve that raised interest rates aggressively to rein in some of the highest levels of inflation seen in four years. decades.

But as rates rise, it also increases returns on safer assets like US Treasuries, making riskier assets like Bitcoin less attractive. Cryptocurrencies are also difficult to really value, so when growth valuations start to come into question, as they have recently, crypto prices, which have surged in recent years, are less likely to are maintained. So if inflation continues to rise, the Fed will need to stay aggressive, but it may be able to slow down just a little bit if inflation shows signs of peaking.

Coinbase has also been on fire and is up over 65% in the past month. A key part of this upward move was the company’s big announcement that it would be partnering with black rock, the world’s largest asset manager, to provide crypto services on one of its investment platforms. That alone drove the stock higher last week.

Now what

While I think Coinbase needs to further diversify its revenue base and create a more resilient business model, I also think the big exchange will be relevant as long as cryptocurrencies and crypto trading remain relevant. However, the company will release its second quarter results after market close tomorrow, and the results are not expected to be good, given the recent crypto winter.

I’m much more of a fan of Silvergate Capital because it’s the rare crypto stock that has a resilient business model and can actually deliver strong financial results in a volatile interest rate environment. Riot Blockchain is really more tied to the price of Bitcoin, given that it is the asset it operates and owns.

Ultimately, in the short term, Wednesday’s CPI reading could swing crypto prices significantly. Everyone expects energy prices to fall in July, but it will be interesting to see if the prices of other consumer goods and services like food, transport and rent have also started to peak. .

Bram Berkowitz has positions in Bitcoin and Silvergate Capital Corporation. The Motley Fool holds and recommends Bitcoin and Coinbase Global, Inc. The Motley Fool recommends Silvergate Capital Corporation. The Motley Fool has a disclosure policy.

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