shares in this article
Forex in this article
• Bane and gloom in the cryptocurrency market – cyber currencies and cryptocurrency stocks under pressure
• Numerous negative factors lead to a sell-off
• Low prices. Opportunity to start?
The crypto market is in a doom mood right now. After new all-time records were set in late 2021, 2022 has continued to decline. However, crypto companies have been punished even more severely than actual cyber currencies. Because while Bitcoin has lost around 54 percent since the start of the year, Coinbase’s paper has lost nearly 80 percent. And the cryptographic platform is not alone in this. Bakkt shares fell more than 74 percent this year, while bitcoin mining company Marathon Digital also lost 80 percent. Due to this discrepancy, the question arises as to whether the cryptocurrency titles are already sold out, and the low prices can be used to start.
Various factors are responsible for the downturn. Thus, global inflation is at a very high level which is now getting worse Monetary policy led by central banks. Liquidity from markets is receding, lowering sales and company profits. In addition, the macroeconomic environment also clouded over. High energy prices weigh on national economies, which has prompted the OECD, for example, to lower the growth prospects for the world economy. Many experts and economists even expect a recession. Against this background, investors avoid risk and increasingly part with riskier assets such as cryptocurrencies and stocks. “Crypto fans are used to volatility, but these roller coaster rides to the bottom are getting harder to digest. Now that the era of cheap money is suddenly over, investors are increasingly avoiding risk and turning their backs on cryptocurrency assets,” comments Susannah Streeter Lansdown against Bloomberg of Hargreaves.
Difficult to make forecasts
As such, it is difficult to predict whether the downtrend in cryptocurrencies will last longer or if the bottom has already been found. Oanda analyst Ed Moya told Bloomberg: “The cryptocurrency sentiment is appalling as global cryptocurrency market capitalization has fallen below $ 1 trillion. Bitcoin is trying to find the bottom, but if prices go below 20,000- If the dollar goes down, it could get even uglier. ”
A look at P / E
When asked what is the situation with cryptocurrency stocks, it is worth looking at the price to profit ratio (P / E). It is calculated by dividing the market price by the earnings per share. This measure helps to determine whether a company is currently valued low or high. In general, a P / E ratio of 20 or more is considered overvalued, below which stocks are considered cheap. However, if the price to earnings ratio is negative, it means that the assessed company is in the negative. If you look at different cryptocurrency stocks now, it quickly becomes clear that the P / E ratio does not support the entry here. This results in a negative price / profit ratio for Marathon Digital and Bakkt. Only Coinbase shares have a positive P / E of 4.53 (as of June 14, 2022).
Watch out for mining supplies
A look at various cryptocurrency stocks also reveals that mining stocks are under particular pressure in the current environment of high energy prices, high inflation, and rising interest rates. Eventually, they risk making energy-intensive bitcoin mining unprofitable due to soaring electricity prices. For this reason, many mining companies have been forced to part with their BTC packages in recent months in order to be able to cover operating costs. These companies also suffer from the inability to fix prices and depend solely on the prices of cyber currencies. So you can’t pass the higher costs onto your customers.
This should be borne in mind by investors who do not directly invest in cryptocurrency or cryptocurrency stocks, but rely on the Bitcoin ETF. Because they often consist largely of these bitcoin seeking companies like BTC-ECHO points out. This could prove to be an opportunity if market sentiment changes and things start to improve again. However, since no one knows when this will happen, there is also a risk that the mining company will not survive until then and will go bankrupt sooner.
Be careful when entering
According to BTC-ECHO, anyone who plays with the idea of using the currently low prices to (re) enter cryptocurrency shares should initially take small steps, i.e. expand the investment in tranches. Nevertheless, you should always remember that the sentiment in the cryptocurrency market is even more dependent on the psychology of the market. This means that when things get worse, panic sales come faster, but on the other hand, it can also increase disproportionately if the mood turns positive. Ultimately, each investor has to decide for himself whether it can be assumed that the current negative factors are already priced sufficiently. In any case, strong nerves are needed.
Editors of finanzen.net
This text is for information purposes only and does not constitute an investment recommendation. Finanzen.net GmbH excludes any recourse claims.
The leverage must be between 2 and 20
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