When a crypto-meltdown collides with earnings reports.
By Wolf Richter for WOLF STREET.
Upstart Holdings, an AI lending marketplace, reported a debacle afterhours on Tuesday. Revenues plunged 31% to $157 million, even as operating expenses jumped, producing a net loss of $56 million, compared to a profit a year ago. The company partners with lenders to use its AI software to make consumer lending decisions, and it originates consumer loans, and the loans on its balance sheet nearly tripled year-over-year to $700 million. The company slashed its forecast for Q4. Earlier this month, it laid off about 140 employees who processed loan applications.
The funny thing – the reason we’re even paying attention – is that after its IPO in December 2020, at $20 a share, it became a meme stock and spiked by 1,900% to $401 intraday on October 15, 2021. On May 9, 2022, it entered into my pantheon of Imploded Stocks when the stock [UPST] collapsed by 45% in afterhours trading, to $42, down 90% from the high. Torpedoes be damned, dip buyers jumped in and drove the shares up again over the pivot summer, before it all came apart.
Today, shares plunged 24% in afterhours trading to $14.47, down 96% from the high. Of course, after the preceding collapse, that last 24% dip can barely be seen. These are truly spectacular free-money bubbles and busts (data via YCharts):
CarGurus, a new and used vehicle shopping website, was inducted into my pantheon of Imploded Stocks on Tuesday afterhours when it plunged 23.7%, after having already dropped 3.2% during the day, to an all-time low of $10.50, down by 79% from its recent high in February 2022.
The company had gone public via IPO in October 2017 at $16 a share. Even after the plunge, the company still had a market cap of $1.2 billion. Unlike nearly all of our heroes here, the company did make net profits in the years through 2020, but then started booking some losses. Today it reported a 91% jump in revenues, as the company switched from a listings website to a “transaction-enabled” site. It reported net income of $19 million.
But results missed expectations for the quarter, and it slashed guidance for Q4 revenues to $300 million at the top end, when analysts on average expected $468 million. And its guidance for adjusted earnings per share was about half of expectations (data via YCharts):
Affirm Holdings, the most hyped Buy Now Pay Later (BNPL) lender, reported earnings – you know what I mean – and in afterhours trading on Tuesday, its shares plunged 15.1% today, to $13.28 at the moment, a new all-time low, and down 92% from its high in November 2021.
It reported that it lost $278 million in the quarter, on $361 million in revenues. “As you will see in our numbers, we posted another strong quarter,” the company said with perfect cynicism in its shareholder letter.
The company went public via IPO in January 2021 at $49 a share amid immense hoopla. By October 2021, shares hit $176.65 after which they plunged. The company has lost gobs of money every year. Over the last four fiscal years, plus its first fiscal quarter ended September 30, it lost $1.66 billion. Revenues jumped, on the Silicon Valley model: the more you sell, the more you lose.
It lowered its full-year forecast and revenue guidance and disappointed with its guidance for its second fiscal quarter, blaming “the continued and pronounced slowdown with a particular large merchant partner,” likely Peloton. And shares plunged further. Even after this 92%-off discount, Affirm [AFRM] still has a market cap of about $4 billion (data via YCharts):
During the day…
Lyft, reported earnings – you know what I mean – Monday afterhours, and on Tuesday shares kathoomphed 22.9% to $10.90, a new all-time low.
On the first day of trading following its IPO, the shares opened at $87.24, and then spent the day plunging 10%. “IPO investors tried to unload while they could,” I mused at the time. At today’s closing price, shares have collapsed by 87%.
It reported a loss for Q3 of $422 million. This brought its cumulative net loss since 2017 to $8.0 billion. That a taxi enterprise could lose that much money is just mind-blowing. That anyone would have ever bought this misbegotten stock is even more mind-blowing, because the losses aren’t a secret. But like I said before, the free-money virus that has been circulating since 2009 has turned investors’ brains to mush:
The Binance-FTX-takeover drama following the 80% plunge of the FTX token in 24 hours, and the liquidity crisis at FTX and its affiliate Alameda Research because the value of the FTX token had collapsed and turns out suddenly that Alameda Research had a huge position in it, the plunge in cryptos generally with Bitcoin down about $2,000 at $18,100 currently, and the plunge in everything related to cryptos, such as stocks of crypto miners and crypto exchanges – all of it provided for a lot of drama during the day.
This was peppered with headlines, for example, about the CEO and founder of FTX: “Crypto billionaire Sam Bankman-Fried’s net worth could shrink by over $13 billion,” which apparently would still leave him with a couple of billion, down from the crypto miracle peak of $26 billion. This stuff just vanished when the cryptos plunged. Truly big numbers, but it’s just cryptos they’re playing with, and so fine.
There are other investors in FTX that are looking at a wipeout too, the usual suspects, “including Softbank Vision Fund, Singapore wealth fund Temasek, and Ontario Teachers’ Pension Plan, who sunk $400 million into the exchange at a $32 billion valuation in January,” according to Bloomberg.
Neither Binance nor FTX nor FTX’s affiliate Alameda Research are publicly traded companies, so there isn’t much disclosure, outside of a tweeted bailout-takeover announcement between Binance and FTX to “help cover the liquidity crunch” at FTX.
But it had a big impact on related stocks.
Robinhood Markets got sucked in because there had been rumors since June that FTX, with its limitless crypto super-powers, was exploring a possible acquisition of Robinhood. Sam Bankman-Fried already owned about 8% of Robinhood. But with FTX collapsing, those dreams are gone.
Shares [HOOD] plunged 19% during the day to $9.74, wiping out some of the dip-buyer frenzy since the FTX buyout rumor started in June. Shares are down 88% from the peak in August 2021:
MicroStrategy, the dotcom-bust survivor and enterprise-software-provider-turned-into-leveraged-bitcoin bet, plunged 20.5% on Tuesday, to $211.84, down 84% from the peak:
Coinbase Global [COIN], a crypto exchange, plunged 11% during the day and afterhours to $50.45, down 88% from its high in April 2021, as the FTX collapse was threatening the entire crypto space, and exposing how fragile, interconnected, and concentrated the whole thing is.
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When will the bottom be in? I think a clear signal will be when this crypto stuff returns to its true value.
That is, zero.
The bag holders won’t let it get to the true value. They know what they own. But close enough.
Crypto businesses, like other businesses, have real costs but rely on income from an intrinsically worthless product to exceed them. Mission impossible. From a P&L standpoint, Carvana is like Apple compared to these crypto enterprises.
There is practically little difference between the FTX token and excessively printed US Dollars. The key difference is that FTX token is an asset and not a currency.
The crypto and other implosions are signals that the USD debt bubble is set on a course to pop, to be reflected through all assets, like Crypto, Equities, RE, Autos and more that mopped up these excess dollars.
Now the Fed wants its money back.
Dollar at multi-decade highs….crypto dropping off a cliff. Far better to load up on benjamins.
Benjamin is getting sliced by inflation. There is no easy way out.
Commodities should retain value in face of inflation, but they are not investments by design.
Today inflation is far from under control as supply keeps falling. So interest rates will have to go much higher. Once supply can be maintained, bonds will become attractive.
Gold is down about 8% in the past 12 months. About the same as inflation.
And your crypto dollars are sliced by inflation too. Geez.
Reminds me of a Jethro Tull album title: Thick as a Brick
Cryptos do not represent a store of value, since they do not generate cash flow or dividends . They are far too volatile to be used for transactions . Cryptos value lies in their ability to launder money and to hide monies from the Feds. The downside to this is where do those investors/ gamblers hold their cryptos . Ultimately they have to trust some other entity with their cryptos . There is no FDIC or SIPC to backstop holders of Cryptos . Recent events have resulted in calls
for some type of government intervention in The Crypto market . But government intervention will result in the loss of the only reason to hold cryptos -hiding holdings from the Feds.
The bell has rung for the complete destruction of the crypto market . Either the government intervenes and passes regulations that destroy the only reason for cryptos to exist or the lack of trust in those entities who hold cryptos destroy the crypto market .
Cryptos are a store of headaches, tbh
Was thinking something similar, one of the main “values” of crypto is allows for questionable and or less easily tracked transactions to go through. At least in theory, though seems like the blockchain wouldn’t be that hard to check, maybe this seems to vary for different coins. So in some sense, beyond the propping up by investors, there’s always “demand” for cryptos holding up some base value based on transactions by arms and drug dealers, small time crooks and other shady types–mixed in with maybe some legitimate transactions in cases where ex. security of trades is lax and the parties are worried about data theft, or where the government or banking authorities themselves are corrupt and crypto may at least on the surface offer an alternative. Maybe in these sorts of cases, the volatility of crypto value might be a risk premium some might tolerate. One of the ironies here is that loose Fed and central bank monetary policy over the past 4 decades was the largest factor helping to prop up crypto by debasing and destabilizing the value of the USD and other government-issued currencies. Cryptos (and all the electricity wasted by their mining) would have never been a thing, at least for legitimate business and savings if dollars, pesos, lira and other currencies were managed better with more price stability. As it happens, the incompetence of ZIRP and QE in the USA continued way past the GFC recovery, and runaway inflation in places like Argentina (and eventually in the US as well as countries like El Salvador also use the dollar) made a case for crypto as an alternative, at least for snake oil salesman who knew how to advertise it that way. Of course that only works as long as crypto stays unregulated, but who knows, maybe attempts to regulate it might lead to a resurgence depending on the new tech for it.
That comment is shortsighted. Crypto is in its wild west phase. It will mature over time and be integrated as digital assets in every corner of the world. In my opinion, most coin projects are experiments and highly risky… many will fail. However, few projects, in particular, Bitcoin have staying power that I’m willing to put my long term money in (within reason). Perhaps the crypto space can be defined this way… Bitcoin (store of value / scalable transaction capability through the lightning network), Ethereum (programable money), and everything else. The ‘everything else’ may resemble Bitcoin, but do not confuse the entire crypto space with Bitcoin. Bitcoin is simple, its not tied to a business entity directly, or a figure head, or a government… It is the internet of money… or put another way… money for the internet. When you start to appreciate Bitcoin in this light… as a commodity with very innovative and unique attributes and use cases… then you will start to under stand it.
I made some money i cryptos.
Personally, cryptos are worthless but you have insane people still paying $17K for 1 BTC.
Dear Mr. Jcohen, Best comment analysis on crypto I’ve seen on financial media. And, Mr. Wolf is the King of Wall Street Media – IMHO. CNBC, Marketwatch, Dow Jones are all advertizer captured trash regurgitators. 110+ comments here on this article. Marketwatch.com gets 1 to 2 avg an article.
“There is practically little difference between the FTX token and excessively printed US Dollars.”
I don’t agree. I think there is a world of difference.
Crypto is a phantom derivative, based on the intrinsic value of the US dollar. The breakdown of the presumed support for the underlying valuation based on correlation with the dollar is why crypto is failing.
Trying not to be a bore, I would like to point out that the very honest description of the unit of crypto, the token, should be sufficient for the sober to think carefully about holding assets, like cash, in a flimsy derivative, crypto tokens.
The Mirriam-Webster definition of a token seems accurate.
“a piece resembling a coin issued as money by some person or body other than a de jure government”
I think we need to see bankruptcies at least.
First the mass layoffs, the individual bankruptcies, then business bailouts (no business bankruptcies).
I say this because even junk bonds carry real negative rates today.
The clearest signal is usually when you try to withdraw customer funds from any exchange, funds that they promised not to comingle.
But before you give them money, try to find a physical business address for any exchange that you’re inclined to send money too. They tend to have drop boxes that are drop boxes for other drop boxes in a part of the world that is far far away.
Then sit down and have a drink and a think.
MSM pundit “Numerology” states that markets have always gone up after mid-terms 3rd year of presidential cycles. What pundits forget to mention is that we have never had a recession during the 3rd year of a presidential cycle…
Yet “Astrology” has now theorized that the latest blood moon will bring a “shocking global event”…so perfect explanation for the next few weeks of market surprises…HA
Question remains…are Homo Sapiens devolving???
Yes. What’s going on worldwide is clearly a biological phenomenon. Devolving due to lack of an individual consequences oriented environment, or evolving to a social species model like ants under population density pressures, individual helplessness under irrational fears, intense non-empathetic communications pressures, and new social characteristics classes.
Surely you don’t think your description of current human society was recently invented ?
I assert it is an old malady. As old as men and women.
And all the speculators are sitting back, waiting for – expecting – a FED pivot to save them and then it’s “off to the races” again.
Meta followed Twitter with a big Mass Layoff. Many of these imploding companies will do the same.
However, that is not mich of my concern. The mainstream results have been pathetic as soon as you account for inflation and the p/e of 30+ that is based on now evaporated future earnings expectations.
I believe that pear pressure will mount on bigger tech companies to announce mass layoffs. I think the next big names are Lyft, Uber, Amazon, Google.
And where are many of these tech jobs located . CA.
CA is about to fall off the cliff economically and with it it’s vastly overpriced real estate market
Austin, Boston, Boise, NYC, Chicago, Dallas, Houston….
also work from anywhere means that these jobs (the people who don’t do them) are located anywhere.
To add to Wolf’s list, Seattle, Phoenix, NYC (after SF showed the way, NYC gained some hip money losing “tech” start ups)
It’s not so much where they are located with work from home on a terminal VPNed to a company server, but how many similar jobs are lost or under hiring freeze all at the same time. Where can you go?
Wolf reminds me of a song by Huggies Lewis hahahahaha
Uber is destined to layoff big, Amazon and Google will cut 10s of thousands.
Draftkings might get on this list again, earnings were horrible but the media continues to put lipstick on pigs and says the loss was “Only” 1.01 a share. Its another cash furnace and a big gambling proposition in clownifornia just went down in flames.
Plus Tesla with Musk basically working in overtime to alienate his own customer base, maybe even Apple and the whole FAANG bubble with it. Even with AAPL’s profitability the stock price is still doing the same kinds of things Cisco was doing with the first dot-com bubble, building in expectations like for a growth stock that are impossible for such a mature company, leave alone one with such customer-unfriendly practices and inadequate customer service, planned obsolescence, lousy battery storage and other things all but designed to force users to upgrade to the next overpriced and super-expensive model. This maybe worked in the days of ZIRP and QE when inflation was still low and debt taken on with glee by consumers, but Apple’s price premium for the brand name isn’t going so well when Americans are already being squeezed by higher prices for basic goods and essentials, and credit is getting much harder to come by. Not to mention trade wars and tariffs here potentially endangering markets overseas. Apple realistically has to lower its prices for its market, but this means no way it can maintain the level of profitability that’s already way too low for that kind of P to E.
Yes. Users will revert to utility instead of chasing shiny squirrel objects. I still think my Galaxy 5 was my best phone – removable battery, expandable storage, charge other devices, use USB disk drives, fast enough. I has Wikipedia, full world maps, 30G of music, 2 years of pictures, full emergency and medical and travel references, all my Kindle books on it.
New phones come with so much useless junk forcing you into the company rental spyware business model.
I don’t understand the obsession with Apple phones costing $1000 when they don’t do anything materially different from my $220 Android device.
People are strange.
[Typos corrected]
Meta followed Twitter with a Massive Layoff. Many of these imploding companies will do the same.
However, that is not much of my concern. The mainstream results have been pathetic when you account for inflation and the p/e of 30+, that is based on now evaporated future earnings expectations.
I believe that peer pressure will mount on bigger tech companies to announce mass layoffs. I think the next big names are Lyft, Uber, Amazon, Google.
Viz. Uber, how does it survive? Market cap of $56B and no profit. Last I looked an EPS -$3.33!
Someday it’s gonna make money….to the moon!
Doubt it.
(BTW, I have a family member who ‘works’ for Uber — he says he works 3-5 hours a week and earns about $160K a year.)
I actually like Uber for the long term. Uber is actually becoming as much of a transportation company – moving goods, than a ride-share company. Uber has an unique opportunity to combine its freight business, which is growing very rapidly with its last mile delivery through drivers. I think Uber has a last mile cost advantage by using drivers who drive their own cars, rather than Fedex/UPS/etc. And Uber understands the importance of software at coordinating it. As far as ride-share, Uber actually seems very interesting as a play once autonomy is finally enabled. They can wait for someone else to solve the tech and then just partner with them to roll it out.
There are alot of other companies in tech that are in a much worse spot or more highly overvalued. I think that some of the software productivity companies are highly overvalued.
for gametv:
uber and similar ”work” as long as folks do NOT understand ”net net net”
after that, going to be just another bathing opportunity as is clearly pointed out on here…
and, to be clear, have had more than a few friends and family who claimed to be making tons of profit,,, but did NOT understand net, net, net
@gametv
Agreed, Uber seems bit of a puzzle, it has a real business with real revenue and a product that meets a high and reliable demand, which is much more than can be said about hundreds of the bubble companies and recent SPAC’s and traditional IPO’s lately. But something about Uber’s business model is way out of functioning to still be losing so much money even with such high revenues and usage of their app. It seems like one of those companies that’ll probably figure out a way to muddle through and get at least somewhat profitable, as long as they can get someone on board who can figure out how to actually run a business.
For a thorough explanation of why Uber will never make money, look for Hubert Horan’s analysis.
Yes and adding to the point above, the main problem with even the well placed and profitable companies on the list (including the FAANG’s), is that price discovery and realistic valuations have been all but ruined at least since the GFC. That’s the main reason for these ridiculous P to E ratios for the individual listings and the markets overall, and that above all is a result of the recklessness of ZIRP and QE policy, Hopefully now with JPow himself calling on Paul Volcker’s example, there will also be a lesson learned about how prolonged and unnecessary monetary looseness also damages price discovery itself, supposedly one of the most basic functions of any equity market.
Miller
Don’t forget the distortions and suppression price discovery caused by FASB 157, when the mkt to mkt accounting standard was suspended since March of ’09.
True value(?) is now whatever ‘buy-sell mkts’ do everyday. Volatility is accentuated by repeated ‘from running’ the indexes.
i would say that if the Fed really wants to unleash price discovery it should escalate the process of unwinding the balance sheet. if you look at a chart of the balance sheet that goes back for a decade, you can see the pace of selling this junk off is meager. I think the pace of selling was more back in late 2018, when the balance was much lower.
I want to see the price discovery that would happen if the Fed said that the long term goal is to return to all of its balance sheet to the markets, so that they could do their job. that would be a Fed meeting to remember.
What constitutes a pivot ? Is it 0.25 pct at the December meeting or 50 basis points. I think the Fed is aware of the pernicious nature of the inflation that has, in my opinion, become anchored.
The Fed will have to raise the FFR by 0.75 pct at the next meeting of the FOMC around Dec 13-14. Because, they have lost control of inflation caused by incompetent management of the money supply. Perhaps the only thing that Uncle Milty got right.
*There will be no ‘pivot.’ Despite bad earnings, rising rates, real estate crash, Fed QT, global pressures/trade friction, and a war or two, this BULL will not die.
**Loading up on puts one more time for CPI Thursday but the last bad number in October just ended the day 500 points higher.
***Next week between Treasury’s new debt and Fed’s QT on the 15th Nov is the settlement date removing 150 billion of liquidity – I fully expect to see New Highs across the board.
I want out of this nightmare from which I cannot wake. Nothing makes sense anymore and for someone who retired 5 months ago, the future looks bleak.
Patience Seattle, patience. By May the picture will very likely be much different
Yes. Worse.
I’m with you. A real crash is impending and the Fed will pivot like a dog to its vomit.
I am preparing to pivot as we speak. Rest assured, like James Worthy on the low post, I am keeping one foot in place as I get ready to spin to the hoop and score.
Hopefully the plunge protection team better known as “the fraud squad” will be on vacation tomorrow.
Welly, if I were to suggest a survival strategy I would recommend not watching the market go up and down every day. Keep in mind, as long as you and I have been alive, the good old US has been solvent.
The nightmare will end when the sun comes up in the East, tomorrow, like it has done, forever.
The CPI for October comes out in the morning.
Lyft is an interesting company.
Its founders, who still run the company, cashed out long ago. Pre-IPO, they awarded themselves super-voting shares that enable them to control Lyft completely and perpetually.
The financial performance of the company has no impact on their lives at all, while the jobs of everyone else who works there are at at risk every day.
Lyft has a great future.
It sounds like Lyft’s founders have a great future for sure.
P.T. Barnum was wrong about one item. There isn’t one born every minute. More like every five seconds, based on the absurd valuations some of these companies reached. No connection to financial reality whatsoever.
Financial reality is/was cheap and easy money, at zero percent rates, looking for a home.
Happens every time.
And we still have way more to go until “normal”
Related to FTX is this:
Over two-thirds of all Tether minted across multiple years went to just two crypto companies — Alameda Research and Cumberland Global …..
waiting for apple and Tesla to kathoomphe. Apple has been trading heavy lately. I still feel the government is going to come down hard on Elon( for buying twitter). No better way than to sink Tesla. Hello 100 ?
Elon just sold another $4 billion in shares.
At least apple is wholly profitable compared to all these companies and Tesla
Yeah, but Apple’s huge $250+ billion in annual revenue relies upon an army of hipster duffi perpetually overpaying (hugely) – every year – for phones they could get for 90% less.
That doesn’t sound like an equilibrium for the ages.
And…Apple now has an 8% (!!) standalone weight in the S&P so-called 500.
(An equal weight would be…20 basis points…so only 40 times overweighted…)
Your Apple hipster meme is 14 years old now.
Perpetually over paying! Ha ha! This is the truth! I’ve got to hand it to crapple for psychologically taking over the sheeples minds.
“Your Apple hipster meme is 14 years old now.”
There are still people out there who think Starbucks is for hipsters. Starbucks!
The “hipster” Apple. If my sister threw that &%@?!! Android in the trash and got a “hipster” iPhone to pair with the Apple Watch I sent her, she might not be in rehab right now. She had a stroke and wasn’t found for nearly two days. The newest watch has sensors that would have dialed 911. She’s destined for a nursing home. For the price of a phone.
apple’s problem will be the service business revenue as the monopoly named the app store gets challenged. and wait for china to start using companies like apple and tesla as pawns in a global game to take over taiwan
I view Apple as a $500B low growth behemoth with $1.5T of valuation fat that needs trimming.
Well, at least you described the elephant in the room, and accurately, I think. But I’m often wrong, sometimes totally.
Apple is still hanging on, but Telsa already got halved.
It’s all fun and games until you lose a trillion…HA…
Even AMZN got halved ($188-$85), and I’ve noticed many “high” flyers are back to March 2020 lows already…
But beware Thursday early morning CPI data release, which is just another excuse for possible extreme volatility (profiteering) over macro inconsequential economic data flows…
While I don’t currently share your enthusiasm for gambling, I remember my enthusiasm for gambling in the markets when I was younger. Made and lost enough to make me conservative with that which I can’t afford to lose.
I hope that the investors ,who bought these stocks,went to “jump school”, to prepare themselves for a hard landing
Wolf is going to need a second list, for double-imploded stocks!
Down 75%, and then down 75% more*.
* Option 1: Down 75% from an intermediate bear-rally lower-high, after being down 75% from the post-COVID high.
* Option 2: Literally down 75% from the original 75% … i.e. 93.75% down.
* Option 3: Define a “haircut” as a 50% loss. Then count the number of haircuts investors suffer in a given stock. So for instance, a 75% down implosion is a double-haircut, 87.5% would be a triple-haircut, and 93.75% would be quad-haircut. Until a stock is de-listed there’s no limit to the number of possible haircuts!
* Option 4: Take the classic “2-bagger”, “3-bagger” language (for stocks that double or triple in price), and invert it to “bagholder” for losses. So a 2-bagholder trade is a price cut to 1/2, a “3-bagholder” falls to 1/3 the original price (66% loss), and so on. Then a WolfStreet “Imploded Stock” is a 4-bagholder (1/4 the original price, 75% loss). A 90% loss is a 10-bagholder slaughter. A 99% drop would be a 100-bagholder.
[ The bagholder metric also tells you what the stock has to do for shareholders to break even: a 4-bagger Imploded Stock (down 75%, so at 25% of its original price), has to quadruple in price for buy-and-holders to break even! ]
I think that the precepts extolled in the book: Security Analysis by Dodd and Graham have become relevant, again.
Cash flow rather than capital gains becomes the metric by which to buy stocks.
I’m shocked, shocked that there are losses going on…hot money burns.
The Coinbase implosion seems a bit strange. Being an exchange, it seems like the bulk of the revenue should come from maker/taker fees. I’m sure they offer some other services for Institutional and OTC traders. I know folks have bots running on the Pro platform, so the trading is non-stop. People still trade that stuff. However, Coinbase is a little tame compared to Kucoin, but they still should be making money as the biggest crypto exchange in the US.
They have only been a public company for around 1.5 years so I can’t imagine they have massive debt since they just IPO’d? So how do they get vaporized like this? It’s like when Bitcoin gets slammed, everything it’s connected with takes a gut punch. Eh, who knows? Who cares?
I’m sure they’re all up to some shady shenanigans, cleaning money, and making those tokens look real shiny.
Warren Buffet’s protege, Cathy Wood, loaded up – after dumping out of Robinhood (according to some article). Why would anyone touch Robinhood with a 10 foot pole? Such an obvious trap.
Anyways, now that Bitcoin is on the fritz, it shouldn’t be long until the rest of the collateral gets smoked, and we can see some of those ‘financial runs’ ole Yeller was talking about last year.
Coinbase’s claim was that they were the exchange doing genuine financial compliance. This would put them at a competitive disadvantage to someone like rival Binance, that just set things up virtual and offshore, except to a US-based stub, binance.us, to befuddle regulators. Which all lays bare the question: best case, once the noncompliant (illegal) stuff is stripped away, is there enough left to be a legit business in crypto? I would say, not for all the crowds of entrants and sh!tcoins and so forth. Hence they melt like spring snow. But o;ne wouldn’t think so, listening to the touts.
Ricky,
So…
Coinbase has $3.4 billion in long-term debt.
In Q2, it reported that revenues (from trading fees mostly, as you said) collapsed by over 60%.
When an exchange goes bankrupt, your cryptos in your account there become part of the bankruptcy proceedings, and you’re an unsecured creditor. That has been clearly spelled out by now, and has been tested in bankruptcy court.
If people pull their cryptos out and don’t trade, the revenues vanish, and all that remains are the expenses and the debt.
For now, Coinbase still has a lot of cash. So bankruptcy is not a huge risk at this point.
Wolf
Yes! Losing the holdings/USD in your account when the walls start closing in on these exchanges is the entire reason I exited the crypto trading game-floor last May. One of my top 5 things to laugh at back in 2021 was when people would tell me Bitcoin is going to $100K. I would try so hard to understand their point of view before excusing myself, abruptly, before laughing or worse.
Yes, crypto has no value, but it was a good way to make money when you looked at it as a trading vehicle and nothing more. That said, HUGE hat tip to those who mailed in their orders to Japan to buy Bitcoin (in its infancy) and held it to $50K plus. You deserve every fkn penny!
Say what you will – it was a pretty easy way to stack up some extra moolah once it was obvious that Bitcoin was trading with the stock market (around 2021-ish). Looking back, that was the time when all the madness in the stock market kicked off too. Interesting times and thanks for the cash lol.
Thank you, Wolf for the breakdown! Lets see what Home Depot has to say in a few minutes. Place your bets!
oops. HD is next week. Fairly light action on the Options Chain too. Hmm…
Also, Coinbase went public through a “Direct Listing” where share just started trading, and not an IPO. So Coinbase didn’t issue or sell new shares to raise capital as part of going public. That may help explain the level of debt Coinbase has as referenced by Wolf.
Makes sense. Thank you rojo!
CONbase has held out longer than I thought. I figured they’d already be bankrupt.
And just like that…
Disrupter companies got disrupted.
The greater fool theory works…until you run out of greater fools.
On the way down, the greater fools start devouring each other (as in crypto), and that runs out too.
All these billions that have been burned by unicorn companies in the past decade were revenue for many normal, viable businesses. These revenues falling away now must be felt by them.
Agreed…think of all the avocado toast delivery services and beard oil salons in SF and Brooklyn being devastated by the Slaughter of the Unicorns.
More seriously, you are right but the principle reminds me of the argument for Bridges to Nowhere – even waste (read corruption) stimulates the economy.
Well, so would mass murder (gun sales, medical treatment, and funeral services) but it isn’t a societal plus in the near/medium/long term.
“Do no harm” and “Waste not, want not” became epigrams for a reason.
With the $100 mil the US used to build an online beard oil salon directory, China would build 2 factories. I think I know which country got more lasting value.
To be clear, I agree with you and I was not advocating for economic activity that doesn’t create value. I’m just pointing out that results of normal, viable businesses are also going to fall because of the bubble bursting. They have benefitted for years from the spending largesse of unicorns and now that party has ended.
While I agree with your observation that there will be collateral damage as the excesses supporting the inefficient economy collapse. I am agnostic in worrying about individual plights in the coming tidal wave of business and personal failures.
The current system is collapsing under it’s own weight. I don’t see the point in wasting more resources to prolong it. I could be wrong.
It’s good to see the Ontario Teachers’ Pension Plan are losing more money. Teachers that I know in Ontario I told them to hedge the positions the Ontario Teachers’ Pension Plan holds about a year ago.
These people probably have no choice in what their pension fund invests in. It is captive capital. I feel sad for them.
I don’t feel bad for anyone with a pension plan sustaining losses that tries to get its money from buying up US residential properties and healthcare practices for their rent seeking behavior. That teachers fund does (as does Calpers and many I’m against). The fact they’re into crypto makes it even better as they could have used that money to screw up the US healthcare system and housing even more.
You make an important point about the poor little capitalists, willing to fund the bottom of the barrel, losing their nut. I agree.
What makes it even more poignant is that it is a pension fund. You and me agree on at least one concept, although I’m not sure. Probably not.
I suspect that the amount of money that the OTPP wasted on a crypto exchange is not sufficient to cause them anything more than minor embarrassment. Do you have any idea how large that fund is?
I was stunned to read a pension fund invested $400 million in this muck, until I looked up their assets are $221 billion. Just a flyspeck for them.
But if they invested in this crap, fck knows what other garbage they invested in. There is never just one cockroach in the kitchen…
Great coverage. It’s hysterical that people chase these memes. Nobody remembers February 1637.
How did you figure those stocks topped in early 2021?
I started seeing it in March/April 2021 and started covering here it at the time, first on March 3, 2021:
https://wolfstreet.com/2021/03/03/was-that-the-ipo-stocks-bubble-that-just-popped/
One after the other, they topped in February and then plunged. Some of the ETFs and indices that tracked these stocks began reflecting it, and I covered that as well such as the IPO ETF [IPO] or Cathie Wood’s [ARKK] or the Post-SPAC index.
As you can see, the bigger stocks topped later. Meta in October, Microsoft along with a whole bunch of big tech topped in November 2021. The Nasdaq topped in November; the S&P 500 on Jan. 3, 2022.
Awhile back, my young neighbor quit his job to do peer-to-peer lending online. He got married and soon the couple were embarked for a more upscale home.
Every bubble era has its boomtown rats. I haven’t heard from him, but I hope he got back on the job-jumping carousel ….
“Truly big numbers, but it’s just cryptos they’re playing with, and so fine.”
Except for all the jadrools who now have their “wallets” brimming over with wonderful tokens. Buddy, can you spare a dime?
Last man standing, Binance, is under all kinds of investigations vis a vis Iran, North Korea, etc. (But every search engine turns up scads of its ads atop the pages, to nudge all the real news down off the page.) Bonus points: it is one of the inside investors in privatized Twitter.
For manias there’s no limit. The “value” of crypto is just an illusion. Bankman-Fried did not lose $13B. He never had that amount of dollars. The same is true if you look at Tesla shareholders. They (some) will have money once they sell. Musk seems to understand that :-)
All this jumble is the direct result of the influence of libertarianism: i.e., (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. In other words develop a financial system that replaces the dollar one. It’s a fantasy, like all other libertarian memes. So anything can be promised and little produced. It won’t disappear because it has a legitimate purpose: to launder the profits of criminal syndicates and hide the cash of tax cheats. Otherwise, its less than useless.
Holy Cow!
Bitcoin is down 14% as of 9:25am PST.
Year to date, Bitcoin is down 73%.
It’s rigged and a scam so any movement, up or down, regardless of size isn’t all that surprising. FTX apparently isn’t going to have Binance come and save them…hilarious. Queue the FTX Larry David Super Bowl commercial with that ending…classic. Also fitting that FTX is the sponsor for the Miami Heat’s arena. Florida is a sunny place for shady people (I’m from FL and see it happen all the time).
Question : Is it possible they are manipulating the S and P index and Russell 2000 index in similar fashion they did to Libor rate few years back ?
I ask because stories like this are all over the place. I do realize the indexes are ” weighted “, but even those stocks like APPL, Meta , TSLA etc are getting crushed . But the indexes are no where near down that much.
I am guessing I am way off base here , but something just does not seem to pass the smell test.
“I am guessing I am way off base here ,”
Yes, you are.
1. The energy sector is HUGE, Exxon and Chevron are among the biggest companies in the US. Exxon [XOM] is up 78% year to date. There are lots of companies in the US energy sector. The US is the biggest oil and gas producer in the world, it’s a big exporter of petroleum, petroleum products (gasoline, diesel, jet fuel, etc.), and natural gas (pipeline and LNG). And energy stocks have been booming. This includes related stocks, such as fertilizers etc. This has pushed the indices up. Without energy, the indices would be a lot lower.
2. A few other sectors have been hanging in there, without big gains or losses.
3. Apple is down 26% YTD/peak. The S&P 500, where the booming energy stocks play a huge role, is down 22% YTD/peak. The Nasdaq is down 36% from peak.
Thanks Wolf. I do appreciate you bringing me up to speed. I sold my XOM way too soon. :-)
Wolf:
Thanks for bringing us the apt analysis and all these charts which is a show of horrors !!
Imagine the mountains of money that got sucked in then evaporated as these charts show.
With Meta and Tesla now on slippery slopes -Musk is literally throwing darts and resorting to his fantastic ideas he had before wading into the Twitter mess. He appears to be flailing.
A clear example of the immense harm a self-professed ‘expert’ with a lot of money in his pocket could do to himself.
There are many more ‘experts’ who are still keeping their monies in the market, moving it around, so this bloodbath will be going on for a while before we see people jumping off buildings and other unfortunate ends to financial chivalry..
I wonder if Meta is in more trouble than Tesla. Both Facebook and Instagram are mature technologies and are difficult to monetize further. Meta’s virtual world stuff was beyond stupid the day it was announced. Zuckerberg didn’t have any ideas beyond rehashing Second Life. I don’t know how Meta as a whole can make any money in the future.
“Imagine the mountains of money that got sucked in then evaporated as these charts show.”
———————————————–
The mountains of money was created by the FED/Bankers. Not one dollar has evaporated. Buyers bid up assets and overpaid. Sellers took the dollars and ran. The dollar just transferred from a buyer to a seller,
meanwhile the CME just made a new “bet” on the casino economy – Event based Contracts –
we are watching the “wealth effect go POOF daily , stocks, real estate, crypto . The question then is , how much of those were leveraged to buy more. Looks like Elon getting capital calls. Dumbest thing ever to offer to buy TWTR for such a premium. He needs to lay off the ambien
Once the layoff train gets rolling in January, this work from home trend may turn become the lighter fluid that turns a 5% unemployment recession into a 7% later next year.
I doubt that will happen. WFH employees are more productive.
It’s amazing how productive the WFH peeps are while at COSTCO in the middle of the day. /s
Who the hell cares what other people are doing during the day – especially people you don’t work with? Leaders should be able to foster an environment of productivity without micromanaging each minute of an employee’s time. Further, leaders should be able to identify if an employee is meeting the goals of the team and producing quality, timely work to meet deliverables, and if not to make appropriate arrangements to rectify. My team is hybrid, 1-2 days a week in office and the rest from home. On days at home I don’t care if you occasionally take a nap, get your oil changed, run to Costco, fold laundry. Everyone knows the deadlines we have to meet and the quality of work we have to provide, it’s up to you to meet or exceed the expectations without micromanagement. And yeah, put Teams on your phone so we can talk or IM about anything urgent during business hours, but then we don’t expect anyone to ever answer anything outside of work hours. Why is everyone so offending seeing other people outside during the day?
Most of the jobs are secure from lay offs. Once a company starts laying off good employees they suck in attracting new employees. The underlying strength of the economy is such that only companies with limited prospects will be laying off experienced, competent employees.
Markets look like they will roll over here. FED is trying to stop inflation but the White house will try to fight inflation by spending money. Same with many states.
This means interest rates will still keep going up.
This is great! Valuations finally coming down toward reasonable levels. Halfway there.
For those who lost money, lesson learned!
The entire “crypto” space seems wobbly at best right now. It’s almost like the whole Ponzi could crash into nothing in a matter of hours. Will we see BitCON go to zero this week?
Wow UPST taking beating along with the rest of the gang. Market keeps downsizing as the greatest wealth creation in America from the pandemic ends. No one who enjoyed the good times should have any complaints. The 18 months of Risk On environment and IPOS hitting the moon, was once in a lifetime. I’ll get to pay off my mortgage and get some new vehicles. Retirement at 43 never would have happened if not for this Unicorn market. Get in Get Out. A time is history where even the most uneducated zero experience stock investor made money. I still can’t believe the dream is over. ROI will never be the same.
Honestly, the worst thing I can imagine is retiring at 43 ! What a strange boast.
Tomorrow might be epic
Tomorrow might be epic is a phrase indicating a fear of being wrong. In the off chance the market falls like it did in 1987 when the only social connection with ones’ imploding portfolio was the telephone which was jammed up with asset holders calling to sell. Wait time was eight hours.
Or maybe you are shadow predicting that the “market” will soar to greater than the stock price was today.
It is likely to be epic like a morning constitutional, memorable for the next 12 hours.
My goodness, it was just last week or so when I looked and saw those DoggyCONs had more than doubled to 15 cents, when Muskeg burped or something, and now they’ve crashed back down into the 7 cent range.
Wait until Muskeg says “pull my finger”.
To the MOON!
Very much earlier I commented in this forum..that this crypto fever (or some idiot sickness) is nothing but scams. Yet many continue by greed to try their luck. What is worrying now..the big investors are SWF and pension funds..Where does their funds come from? Are they staffed with high paying employees who are to do a proper job always? Who is responsible for the mess?
This is like watching Demolition Derby.
Every time WR posts a new article I read the headline, hoping none of my longs are there.
I notice ZH has a Nov 12 article titled “Are Robots And AI Really Going To Displace All Workers? Probably Not”. I seem to remember having seen the arguments given in that article somewhere else before…
Never mind though. It’s all just BS. :-)
JeffD,
This comment is braindead. If you cannot figure out why it’s braindead, you need to go have a beer and think about it.
OK, I’ll help you.
1. The headline you cited is braindead. No one ever said they would “Displace All Workers?” What kind of bullshit is this?
2. What you did with the headline is braindead.
Stupid crap like that on a Saturday night is hard to take. If you see it in a title on ZH, leave it there and don’t drag into here or else you will just look stupid.