On Aug 17, the cryptocurrency market tumbled after the Fed released the minutes of its July FOMC meeting a day before. Majority of Federal Reserve officials remained concerned that the general price level stayed elevated despite the central bank’s decision to adopt strict monetary control and aggressive interest rate hike policies in the last one and half years.
Consequently, the minutes indicate the possibility of more rate hikes in the near future. At present, the Fed fund rate is in the range of 5.25-5.5%, marking the highest level in more than 22 years. Per the minutes, “In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be sufficiently restrictive to return inflation to the Committee’s 2% objective over time.”
On Aug 17, the yield on the short-term 2-Year U.S. Treasury Note rose to 4.928%. This yield is closely linked to the movement of the Fed fund rate. The yield on the benchmark 10-Year U.S. Treasury Note touched 4.255%, its highest since October 2022. This link is closely associated with the mortgage rate. The yield on the long-term 30-Year U.S. Treasury Note closed at 4.367%.
Prices of cryptocurrencies are inversely related to the market interest rate. Following the above-mentioned developments, prices of cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Dogecoin (DOGE) and Litecoin (LTC) plummeted 7.3%, 5.8%, 4.4%, 8.45 and 13.4%, respectively.
Other Concerns
The Wall Street Journal reported that Elan Mush promoted space travel company SpaceX wrote down the value of its bitcoin holdings by a total of $373 million in 2022 and 2021, and had sold the crypto currency.
U.S. banks are currently under rating watch. On Aug 15, Fitch Ratings warned that it may downgrade ratings of more than a dozen U.S. heavyweight banks in the near future. The rating agency already cut its assessment of the U.S. banking sector in June.
Fitch said that another one-notch downgrade of the banking sector’s rating from AA- to A+ will compel the rating agency to reevaluate the ratings of all 70 U.S, banks that it covers for possible downgrade.
On Aug 8, Moody’s Investors Service cut the rating of 10 small and mid-sized U.S. banks by a single notch. Moreover, the rating agency put six big banks under review for a potential downgrade. Moody’s also changed its rating outlook to negative for 11 banks.
Stocks in Focus
Robinhood Markets Inc. (HOOD – Free Report) operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds, options, gold, and cryptocurrencies. HOOD buys and sells Bitcoin, Ethereum, Dogecoin, and other cryptocurrencies using its Robinhood Crypto platform.
Robinhood Markets has an expected earnings growth rate of 57.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18% over the last 30 days. HOOD currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Block Inc. (SQ – Free Report) is an online digital and mobile payment platform for consumers and merchants and is the parent company of Square and Cash App. The users of Cash App can buy, sell, send and receive Bitcoin. In addition, SQ’s decentralized tbd platform allows developers to build decentralized finance applications to run on programmable blockchains. SQ is also one of the largest Bitcoin investors.
Block has an expected earnings growth rate of 68% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last seven days. SQ currently has a Zacks Rank #3 (Hold).
PayPal Holdings Inc. (PYPL – Free Report) operates digital wallets and allows users to buy, transfer and sell cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash and Litecoin. PYPL’s users can check out and pay using crypto to online merchants. Its mobile wallet Venmo also allows users to buy and sell cryptocurrency. PYPL has become the first major U.S. fintech company to offer its own crypto token with a dollar-pegged stablecoin known as PayPal USD.
PayPal Holdings has an expected earnings growth rate of 19.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 90 days. PYPL currently carries a Zacks Rank #3.
Accenture plc (ACN – Free Report) is a global system integrator, which provides consulting, technology and other services, markets Ethereum-based blockchain solutions to businesses to make it easier to process payments.
Accenture’s expected earnings growth rate for the current year is 8.2% (ending August 2023). The Zacks Consensus Estimate for current-year earnings has remained the same over the last 90 days. ACN currently carries a Zacks Rank #3.
Interactive Brokers Group Inc. (IBKR – Free Report) is a global automated electronic broker. IBKR executes, processes and trades in cryptocurrencies. IBKR’s commodities futures trading desk also offers customers a chance to trade cryptocurrency futures.
Interactive Brokers Group has an expected earnings growth rate of 39.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. IBKR currently carries a Zacks Rank #3.
The chart below shows the price performance five above-mentioned crypto-centric stocks in the past month.
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