While China's intensifying crackdown on cryptocurrency mining is the primary factor driving a slump in digital currencies, the Fed’s recent hawkish pivot adds to the currencies’ woes. So, it could be wise to avoid shares of cryptocurrency related companies Coinbase (COIN), Riot Blockchain (NASDAQ:RIOT), Marathon (MARA), and Bit Digital (BTBT). We think they are at risk of losing more value in the coming months. Read on.While the world witnessed a cryptocurrency boom earlier this year—with the most popular digital currency bitcoin hitting its $64,863.10 all-time high on April 14—China’s intensifying crackdown led to a major decline in the cryptocurrency market. While bitcoin has so far lost more than half its value since its April high, other cryptocurrencies retreated significantly also.
Crypto investors' sentiment has been further dampened by the Fed’s hawkish pivot. The Fed said last week that it expects inflation to rise 3.4% this year and sees two interest rate hikes in 2023, which is earlier than was expected. Since this reflects the central bank’s rising concerns over inflation, risky assets like cryptocurrencies will likely continue to face significant pressure.
Given this backdrop, we think it is wise to avoid cryptocurrency related stocks such as Coinbase Global, Inc. (COIN), Riot Blockchain, Inc. (RIOT), Marathon Digital Holdings, Inc. (MARA), and Bit Digital, Inc. (BTBT). They look significantly overvalued now and are expected to continue declining in the near term.