From FTX to Silvergate, Red Flags Are Floating for Crypto’s Year Ahead

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Ready for the weekend? Phil Rosen here, writing to you behind a cup of coffee in California.

It is no coincidence that coffee is one of the most traded commodities in the world. It has a distinct taste and aroma, and people rely on its energizing effect.

It’s almost the opposite of cryptography, which can hardly be said to “exist” at all.

Investors are realizing that behind all this marketing intrigue, there isn’t much. Perhaps the only thing supporting prices is simply the big fool theory, there is always someone willing to buy at a higher price.

These accomplishments have happened repeatedly in 2022 as crypto hacks and a wintery bear market crescendo with the collapse of Sam Bankman-Fried’s FTX.

While my boring black coffee is only worth a few bucks, it hasn’t lost any token value in recent months.

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1. Red flags for digital assets continue to emerge, and Thursday served as a good reminder that the low mood in the cryptosphere is still here. As Insider’s Matt Fox writes, confidence continues to dwindle amid the FTX fallout. At the macro level, lingering recession fears are making speculative assets such as tokens or tech stocks less attractive.

Coinbase stock is a loud alarm bell. Shares of the crypto exchange fell near an all-time low yesterday and remain around 92% below their all-time high reached in April 2021.

“Coinbase’s monthly trading volumes have been on a fairly consistent decline every subsequent month since November 2021,” Cowen analyst Stephen Glagola said of the stock’s downgrade. “[T]there remains low visibility here on a stabilization or a rebound in retail trading volumes in 2023 given the macroeconomic context and the risks of FTX contagion on the prices of crypto assets. »

More notable is crypto bank Silvergate’s nearly 50% fall on Thursday, and the company’s announcement that it would cut 40% of its staff.

The stock market crash came as the Wall Street Journal reported that FTX’s implosion sparked a run on Silvergate, and the company was forced to sell assets at deep discounts to cover some $8.1 billion of withdrawals.

Silvergate’s lost sales debt of $718 million far exceeds its total profits for the past decade.

Now the bank is under fire from a group of US senators demanding answers from CEO Alan Lane for his business dealings with FTX and Alameda Research.

“Silvergate appears to be at the center of the improper transfer of billions of FTX client funds. Americans need answers,” Senator Elizabeth Warren said in a statement. “Those guilty of wrongdoing must be held accountable.”

Other crypto-friendly banks followed in kind. Since October, Signature Bank is down about 30%, Customers Bancorp is down about 15% and Metropolitan Bank Holdings is down 12%.

What is the most likely outcome for the crypto industry in 2023? Tweet me (@philrosenn) or email me ([email protected]) to let me know.

In other news:

Elaine Thompson/AP

2. U.S. stock futures are trading mixed early Friday as investors await the December jobs report, due out today at 8:30 a.m. ET. Meanwhile, WWE shares jumped 10% after former CEO Vince McMahon announced a surprise return. Here are the latest market movements.

3. On file: Top Glove Corporation, Greenbrier Companies, and more, all reports.

4. Goldman Sachs said these 20 stocks are poised to rise up to 50% in the long term. High and sticky prices should subside in the coming months, and this batch of names could benefit from the Cut Inflation Act, according to the bank. Get the full list.

5. Sam Bankman-Fried contributed to a $25 million seed round last year for buzzy start-up, Semafor. But, according to TheWrap, the media company run by former NY Times columnist Ben Smith will return the money. Semafor said Bankman-Fried never had editorial influence.

6. The job cuts at Amazon and Salesforce signal the first step needed to stage a turnaround in tech stocks. For Wedbush Securities, management teams do what investors want by preserving margins and earnings. All told, analysts predict the layoffs could catalyze a 20% rise in tech stocks in 2023.

7. The old era of investing is returning and buying on any dip is no longer the reality. So said Gabriela Santos of JPMorgan Asset Management on Thursday. Investors should now prepare their portfolios for the “end of free money” in these three ways.

8. UBS strategists explained how to invest in China in 2023. As Beijing’s zero-COVID policies come to a dramatic end, markets react with red herrings and the national economy braces for recovery. Find out what the company said this means for investors.

9. This 30-year-old has built a seven-figure net worth. He recommends investing in what you know because that’s what he did to become a self-made millionaire. These are four of his investment principles that anyone can follow to build wealth.

BED BATH & BEYOND INC. Stock Price as of January 6, 2023

10. Bed Bath & Beyond cratered on Thursday. The company said it was considering a list of options to move forward with its failing business, including filing for bankruptcy.

Organized by Phil Rosen in Los Angeles. Feedback or tips? Tweet @philrosenn or email [email protected]

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.

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