Stocks Making Moves: Crypto Edition

It’s been an especially rough couple of months for crypto, with the FTX fallout creating a far-reaching ripple effect that has yet to slow down. According to CoinDesk, Maple Finance just cut ties with Orthogonal Trading amid allegations that the latter was “misrepresenting its financial position,” after Orthogonal failed to pay back $10 million USDC stable coin when it was due.

The reach of FTX’s drama goes further than that though. Infamous “meme” darling GameStop (GME) reportedly laid off even more of its employees today, which included engineers on its crypto wallet team. Plus, the Federal Trade Commission (FTC) confirmed that it opened an investigation into several cryptocurrency firms for “possible misconduct,” though it declined to say which ones. 

While Bitcoin (BTC) is actually trading slightly higher this afternoon, sidestepping the selloff the traditional market is seeing, a bigger picture shows the cryptocurrency has lost over 64% this year, with a recent plateau happening around the 17,200 level. Below, we’ll dig even deeper into how the recent FTX scandal, among other factors, have bit into a few key crypto players’ valuation, and what investors might be able to expect going forward. 

Coinbase Stock Headed Back Toward Record Lows

Just because Bitcoin is up doesn’t mean crypto-adjacent securities are following its lead. Coinbase Global Inc (NASDAQ:COIN), which has been closely watched since its April 2021 initial public offering (IPO) is headed back toward its Nov. 21 low of $40.61. The stock was last seen down 5.3% at $43.52, with pressure emerging at its 20-day moving average once more.

Several days ago, the Financial Times published an article detailing how FTX’s collapse has put an extreme dent in Coinbase’s stocks and bonds, noting that bond maturing in 2028 have dropped by nearly a tenth in price amid customer demand for a 14 per cent yield to purchase debt. On top of this COIN has shed roughly 82% in 2022, and has lost almost 90% of its value since its first close of $328.28 on April 14, 2021. 

Marathon Digital Holdings Nearing Penny Stock Territory

The crypto mining concern Marathon Digital Holdings Inc (NASDAQ:MARA) has taken a mighty tumble this past year, dropping from a roughly five-year peak starting in November 2021, and skimming the $5 level — nearly penny stock territory — this July. Though it did get a bit of wind in its sails following this bottom, the equity’s 160-day moving average made sure the rally didn’t last, and now MARA is headed back toward these lows, last seen down 7.3% to trade at $5.70. 

Short sellers have taken MARA’s sharp pullback as an opportunity to target the stock. Short interest is up 21.4% in the last two reporting periods, and makes up a hefty 35.6% of the stock’s available float. It’s worth noting, however, that the security has landed on the Short-Sale Restricted (SSR) list today. 

Silvergate Capital Hits 2-Year Lows

Today’s FTC probe announcement is also knocking Silvergate Capital Corp (NYSE:SI) down a few pegs, all the way to the stock’s lowest level since November 2020. The equity was last seen down 5.9% at $22.80, creating an 84.8% year-to-date defecit. Options bears ears are perking up in response to SI’s dismal day. So far, 35,000 puts have been exchanged, which is double the intraday average. The most popular positions are the January 2023 20-strike put and the weekly 12/9 22-strike put, with positions being bought to open at the latter. This implies options players are pricing in additional downside for the security in the weeks and months ahead. 

Small-cap stocks are a class of equities that can significantly impact a growth portfolio. There are a couple of reasons for this.

First, in bull markets, small-cap stocks tend to outperform the broader market because investors have a larger appetite for risk. Second, small-cap stocks are historically an indicator of investor sentiment turning from bearish to bullish (and vice versa). This rewards investors who stay invested in these stocks.

Of course, that risk works both ways. In a market correction and/or bear market, small-cap stocks can drop significantly more than mid- or large-cap stocks. That’s the challenge for investors, but one that can be managed when you look for small-cap stocks that are leaning into market trends.

That’s the focus of this special presentation. It focuses on seven small-cap stocks well-positioned for market trends likely to stick around through 2023.

View the Stocks Here

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