Crypto stocks teeter near abyss

• BlackRock CEO Larry Fink expects most digital-asset companies will fold after FTX’s demise

Analysts and investors are struggling to call a bottom in crypto stocks after a brutal month that ended with the head of BlackRock saying most digital-asset firms will not survive. Cryptocurrency firms including Coinbase Global, Galaxy Digital Holdings and MicroStrategy all plunged more than 25% in November.

The declines added to the pain of a dismal year amid a deep and extended plunge in bitcoin and other digital tokens. While that trio of firms rallied last week, they have still wiped out about $52bn of shareholder value in 2022.

Already reeling from the socalled crypto winter, investors were dealt a big blow with the high-profile collapse of Sam Bankman-Fried’s FTX exchange in early November, which sent bitcoin tumbling.

To top it off, BlackRock CEO Larry Fink said last week that he expects most crypto companies will fold after FTX’s demise.

A Schwab index that tracks crypto-linked stocks is coming off its worst month since June and is down 63% this year.

“Questions about whether crypto has a future have become prevalent after a year during which many tokens lost more than 70% of their value and the collapse of FTX has worsened a crisis of confidence that had started in the spring,” said Mark Palmer, an analyst at BTIG.

Few, if any, companies connected to the sector have been spared during the sell-off, with even banks like Silvergate Capital and Signature Bank taking hits. Mining stocks have been among the worst performers, with Marathon Digital Holdings and Hut 8 Mining seeing their share prices cut about in half in November.

TOXIC

FTX’s downfall sparked fears of contagion across the industry, which became a reality last week when crypto lender BlockFi filed for bankruptcy.

“We expect the crypto space to continue to be toxic for investors in the near term and expect overall chain activity to be relatively quiet among users as we continue to wait out potential contagion effects as a result of the bankruptcy of FTX,” Chase White, an analyst at Compass Point, wrote in a note to clients.

Silvergate now finds itself playing damage control. The company, whose shares tumbled by a record 52% in November, said several weeks ago that its exposure to FTX represented less than 10% of its digital-asset deposits. Last week, it said exposure to BlockFi was less than $20m.

It has been a similar situation for Coinbase. CEO Brian Armstrong took to Twitter many times in recent weeks in an attempt to reassure investors that the crypto exchange remains on a solid footing. So far, it seems to have done little to sway traders and analysts.

Coinbase closed at a record low on November 21 and has been downgraded by analysts at firms including Bank of America and Daiwa Securities, leaving it with its lowest number of buy ratings since August 2021, data compiled by Bloomberg shows. Coinbase shares are down about 80% this year, erasing about $44bn in value.

Cryptocurrency mining stocks have fared even worse as soaring energy costs add to the challenge of sinking cryptocurrency values. Core Scientific has seen its share price crumble nearly 99% this year. In its thirdquarter earnings release, the company said losses for the nine months to September reached $1.7bn and it has also said it might have to file for bankruptcy if it can’t find additional funding.

BEATEN DOWN

The slump in crypto-mining stocks is problematic for a group that was already struggling to pay back $4bn in loans tied to mining equipment.

To be sure, Fink, whose firm had invested about $24m in FTX, said he still sees potential in the technology underlying crypto, including instant settlement of securities.

And some money managers see an opportunity in the beaten-down stocks.

Cathie Wood’s Ark Investment Management added crypto investments in the weeks after FTX’s bankruptcy, including in Coinbase, Silvergate and the Grayscale Bitcoin Trust.

Wood told Bloomberg TV that she stands by her forecast that bitcoin — which traded at about $17,000 on Friday afternoon in New York — will hit $1m by 2030.