Cryptocurrency stocks fell in parallel with bitcoin's correction. Will it last?

Bitcoin's correction, as well as the fall of altcoins Ethereum, Ripple and Solana amid the Fed's rate cut, affected the shares of companies related to digital assets. Gemini, a newcomer to the exchange, as well as Coinbase and Strategy's securities declined on Monday. Cryptocurrencies and securities of companies whose fate is closely connected with digital assets - investments are not for the faint-hearted, Barron's notes.

- Bitcoin cheapened by about 3% during trading, with its value falling to $112,100, CoinGecko shows. Ethereum was losing about 8%, down $4139. Ripple, one of the largest cryptocurrencies by capitalization, sagged 5% to $2.8. Solana, whose token may appear in ETF funds along with bitcoin and Ethereum, was losing 8.8% and was trading at $217.

- In trading on Monday, shares of Gemini Space Station - a crypto exchange founded by brothers Cameron and Tyler Winklevoss, which recently held an IPO - collapsed by 3% to $23.4. Gemini's securities are now trading nearly 20% below its IPO price (Sept. 12) of $28.

- Coinbase cryptocurrency exchange securities fell 3.1% to $331.95 on September 22.

- Stock prices of the trading platform Robinhood, which allows trading in both stocks and cryptocurrencies, strengthened by 0.1%, to $124.89.

- Shares of Galaxy Digital, a digital infrastructure company, strengthened 2.5% to $33.7.

- Shares of Strategy, the largest publicly traded bitcoin holder, fell 2.6% to $336.

Shares of cryptocurrency-related companies have moved to a correction following bitcoin, Barron's believes. And the token is probably getting cheaper after the Fed rate cut last week, Adam Morgan McCarthy, head of research at Kaiko, explained to the publication. "Speculative activity increased following the rate cut," he noted. - The speculative bets were accompanied by excess leverage, and even minor price declines led to liquidations that caused a domino effect."

While the bitcoin price is still significantly in the plus side (up 20.5% since the beginning of the year), investors still have to reckon with the fact that cryptocurrency stocks are already trading at maximum valuations.

For example, the securities of loss-making Gemini are highly overvalued, said Compass Point analyst Ed Engel. The stock trades at a Price-to-Sales ratio (P/S) of 26, meaning investors are paying $26 for every dollar of revenue the company potentially generates this year. This is significantly above the average of both direct competitors (3.2) and the industry as a whole (4).

Coinbase shares are trading at a price-to-earnings ratio (P/E) of nearly 45 annualized earnings, while Robinhood's is 75. Galaxy Digital is projected to remain unprofitable both this year and in 2026, Barron's writes. Therefore, we should not be surprised if the securities of cryptocurrency companies continue to fluctuate sharply following the price of bitcoin, summarizes the publication.

"Cryptocurrencies are not for the faint of heart. Neither are stocks of companies whose fortunes are closely tied to digital assets," Barron's noted. However, the publication noted that in the long term, the market remains optimistic about digital assets due to "a more favorable regulatory and legislative environment in Washington."

Bitcoin's volatility, which has long prevented it from claiming reserve asset status, is declining, CoinDesk reported, citing a note from Deutsche Bank analysts. The 30-day volatility hit an all-time low in August, despite the cryptocurrency's price topping $123,500. This could indicate that bitcoin is breaking away from its speculative past and is on track to take its place alongside gold as a recognized reserve asset within a decade, the bank said.

Deutsche Bank strategist Marion Laboure said in a research note published Monday that she expects bitcoin to rise above $120,000 by the end of 2025. The analyst believes that bitcoin and gold will continue to coexist as complementary instruments of protection against inflation and geopolitical risks due to limited supply and low correlation with other assets.

This article was AI-translated and verified by a human editor