Why You Can Be Bearish on Crypto Stocks but Bullish on Crypto
You might still be trying to wrap your head around that sentence. Can you be bearish on crypto stocks and crypto companies but bullish on the crypto industry? It’s been a difficult couple of years for crypto investors. The fall of industry heavyweights like FTX has really put cryptos under the microscope of regulatory agencies like the SEC. People lost millions and even billions of dollars as companies went insolvent.
Earlier this week it was announced that SIlvergate Capital (NYSE: SI) was in some pretty deep financial trouble. The company stated that it would likely have difficulty staying in business for the next 12 months. Silvergate is one of the largest lenders to major crypto exchanges and was hit hard by the collapse of FTX. Shares of the stock have plummeted and could very likely head to zero over the next few months. It is just the latest black eye for an industry that was flying high as recently as 2021.
Should We Buy the Dips on Crypto Stocks?
I’ve touted crypto stocks in the past and even talked about Silvergate as a stock that can provide exposure to cryptos. Of course, that was before all of this news came out as well as the backlash of the FTX collapse. Would I invest in them now? It depends.
So far I’ve steered clear of mining companies like Marathon Digital Holdings (NASDAQ: MARA) or Riot Blockchain (NASDAQ: RIOT). I was watching SIlvergate but the stock always seemed expensive to me. There is reason to be bullish on a company like Coinbase (NASDAQ: COIN) which I have alluded to in the past. Coinbase will eventually be one of the last men standing once all of the dust has settled. Even global crypto company Binance is on shaky ground right now with more allegations of the misuse of customer funds.
Am I Still Investing in Cryptos in 2023?
Personally, I have toned down my investing in cryptocurrencies. There isn’t a single person that believes the industry is stronger now than it was before all of these headwinds happened. Add in the fact that the Mt. Gox unlocking and Ethereum Shanghai Upgrade will likely unlock billions of dollars in Bitcoin and Ethereum over the next year and it is easy to be bearish in the near-term future.
I still think that both Bitcoin and Ethereum can serve a purpose in any diversified portfolio. I also think that stablecoins are one of the most important things to come out of cryptos that can help the mainstream financial world. But I also understand that it is difficult to trust any of these crypto companies right now. I would say steer clear of these stocks until we know what will happen with Silvergate. I don’t see many tailwinds that will cause Coinbase’s stock to gain so I think it should at least trade sideways for the time being. If Silvergate does go belly up, I expect Coinbase’s stock to fall in sympathy. While I will continue to dollar cost average into the blue-chip cryptos, I am staying away from these crypto-related stocks.
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