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3 Stocks to Avoid as Trading in Cryptocurrencies Slows Down

Stock MarketsJul 23, 2021 02:30PM ET
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© Reuters. 3 Stocks to Avoid as Trading in Cryptocurrencies Slows Down

Because China’s widespread crackdown on cryptocurrencies is expected to motivate many other countries to take similar actions, crypto trading might slow down in the coming months. So, we think it could be wise to avoid cryptocurrency-related stocks Charles Schwab (SCHW), Coinbase (COIN), and SoFi (SOFI), which benefit from the trading of cryptocurrencies. Read on.Cryptocurrencies have taken the world by storm over the past few years despite their extreme volatility and lack of regulation. However, retail investing in cryptocurrency is expected to decline in the coming months with China’s intensifying crackdown on digital currencies on concerns over massive energy consumption in the currency mining process and illegal activities, such as money laundering, that are perpetrated using them. In May, the U.S. Treasury Department said that it would require any cryptocurrency transfer worth $10,000 or more to be reported to the IRS.

Russia’s central bank said yesterday that stock exchanges in Russia shouldn’t list investment products related to cryptocurrency prices. And last month, the world’s largest cryptocurrency exchange, Binance, was banned from operating in the United Kingdom. Furthermore, the Federal Reserve’s indication that it will raise interest rates sooner than previously anticipated could lead to further pressure on such risky assets.

Thus, irrespective of one’s views on the prospects of cryptocurrencies, we think it’s better to stay away from the shares of fundamentally weak companies that benefit from cryptocurrency trading, for example The Charles Schwab Corporation (NYSE:SCHW), Coinbase Global, Inc. (COIN), and SoFi Technologies, Inc. (SOFI). These stocks are currently trading at valuations that are not justified by their growth prospects.

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3 Stocks to Avoid as Trading in Cryptocurrencies Slows Down
 

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