Cryptocurrency stocks have been hit hard since the beginning of the year due to the overall risk-off environment. The top two cryptocurrencies, Bitcoin and Ethereum, are down roughly 50% year-to-date.

The stock market has had a difficult first half of the year due to the multi-decade-high inflation, the Fed’s aggressive interest rate hikes, and geopolitical tensions. During the cryptocurrency bull run last year, many crypto advocates argued that it is a good store of value due to its scarcity. However, amid the global macroeconomic uncertainty, crypto stocks have gotten crushed this year.

The U.S. consumer price index came in lower than analysts’ expectations after rising 8.5% year-over-year in July. This led to a rise in the prices of Bitcoin and Ethereum, with hopes that the Federal Reserve would ease its monetary policy tightening.

However, crypto stocks could remain under pressure in the near term as minutes from the Federal Reserve’s recent policy meeting revealed that more rate hikes could be in the pipeline. The policymakers are committed to raising rates as high as necessary to bring prices down.

Given this backdrop, fundamentally weak crypto stocks Riot Blockchain, Inc. (RIOT), Coinbase Global, Inc. (COIN), and Silvergate Capital Corporation (SI) might be best avoided now.

Riot Blockchain, Inc. (RIOT)

RIOT is involved in cryptocurrency mining and the overall blockchain system through various investments. The company has deployed approximately 8,000 application-specific integrated circuit miners at its cryptocurrency mining facility in Oklahoma. In addition, its subsidiary Tess Inc. seeks to develop a blockchain-based escrow service for wholesale telecom carriers.

RIOT’s adjusted EBITDA loss came in at $65.17 million for the second year ended June 30, 2022, compared to an adjusted EBITDA of $2.38 million. The company’s adjusted loss per share came in at $0.50, compared to an adjusted EPS of $0.03. Also, RIOT’s selling, general, and administrative expenses increased 205.7% year-over-year to $10.70 million.

Analysts expect RIOT’s EPS for the quarter ending September 30, 2022, to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters. The stock has declined 62.6% year-to-date to close the last trading session at $8.35.

RIOT’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an F grade for Stability, Sentiment, and Quality and a D for Value. It is ranked #80 out of 81 stocks in the Technology – Services industry. Click here to see the other ratings of RIOT for Growth and Momentum.

Coinbase Global, Inc. (COIN)

COIN offers retailers the primary financial account in the crypto economy, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.

On July 21, 2022, the SEC brought the first-ever cryptocurrency insider-trading case after accusing a former COIN employee of tipping off his brother and friend with confidential information.

The SEC also alleges that nine out of the 25 cryptocurrencies involved in the insider trading case met the security criteria. Still, COIN did not register them as securities even though they had all the hallmarks of a definition of security.

COIN’s net revenue for the fiscal second quarter ended June 30, 2022, declined 63.7% year-over-year to $808.32 million. Its total operating expenses increased 36.9% year-over-year to $1.85 billion. The company’s net loss came in at $1.09 billion, compared to a net income of $1.61 billion in the year-ago period. Also, its loss per share came in at $4.98, compared to an EPS of $6.42 a year ago.

For the quarter ending September 30, 2022, COIN’s EPS is expected to decline 231.5% year-over-year to $2.13. Its revenue for the quarter ending December 31, 2022, is expected to decline 69.6% year-over-year to $759.09 million. The stock has lost 66.1% year-to-date to close the last trading session at $85.44.

COIN’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Growth, Value, Stability, and Sentiment. It is ranked last out of 155 stocks in the F-rated Software – Application industry. Click here to access COIN’s ratings for Momentum and Quality.

Silvergate Capital Corporation (SI)

SI is a bank holding company for Silvergate Bank, which is a leading bank for innovative businesses in fintech and cryptocurrency. 

SI’s total noninterest income declined 23.6% year-over-year to $9.21 million for the second quarter ended June 30, 2022. The company’s total noninterest expense increased 42% year-over-year to $30.55 million. Also, its total liabilities increased 26.3% year-over-year to $14.42 billion.

Analysts expect SI’s EPS and revenue to increase 54.5% and 94% year-over-year to $1.36 and $100.31 million, respectively. The stock has lost 33.9% year-to-date to close the last trading session at $97.94.

SI’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of D, equating to a Sell in our proprietary rating system.

It has an F grade for Value and Stability and a D for Quality. It is ranked #41 out of 42 stocks in the D-rated Pacific Regional Banks industry. Click here to see the other ratings of SI for Growth, Momentum, and Sentiment.

RIOT shares were trading at $8.42 per share on Thursday morning, up $0.07 (+0.84%). Year-to-date, RIOT has declined -62.29%, versus a -9.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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