It is very easy to use the bonds of publicly traded crypto-exposed firms like Coinbase and MicroStrategy to judge the health of the market, and perhaps, monitor its growth.
In the wake of the bankruptcy of rival firm FTX Cryptocurrency Exchange, the bonds issued by Coinbase Global Inc (NASDAQ: COIN) seem to be facing significant underperformance in comparison to the US Dollar. According to data from Finra-Morningstar, The Coinbase bond billed for 2031 has slumped by 15% this November to $0.5.
It should be noted that yields move inversely to prices and the Coinbase bond has recorded a high at 13.5%. Just like Coinbase, MicroStrategy Incorporated (NASDAQ: MSTR) is also facing similar headwinds with the yield on its issued notes billed to mature in 2028 jumped to 13.35% with price slumping to $0.725.
Both companies are two of the most renowned in the Bitcoin and digital currency ecosystem as Coinbase operates a fee trading venue while MicroStrategy is one of the biggest independent holders of Bitcoin with over 130,000 units accumulated from August 2020 to date. While the value of its BTC holdings has dropped by reason of the falling market, it still records over $2 billion worth of the premier cryptocurrency on its balance sheet.
The latest misdeeds in the industry this year have been a major turning point for all players across the board. The collapse of Terraform Labs, Three Arrows Capital (3AC), Celsius Network, and the rest have tainted the trust investors have in crypto firms and these were compounded by the fall of FTX Derivatives Exchange this month.
“High bond yields are reflective of sharply higher rates but also of genuine skepticism about the long-term viability of crypto amongst institutional investors after the high profile collapses of Terra Luna, Celsius, 3AC, Voyager, BlockFi, and FTX,” Mike Alfred, a value investor and founder of digital assets investment platform Eaglebrook Advisors, said.
Investors Monitoring Market Progress Beyond Coinbase Bonds
It is very easy to use the bonds of publicly traded crypto-exposed firms like Coinbase and MicroStrategy to judge the health of the market, and perhaps, monitor its growth.
“Those bond yields were actually the first sign of weakness in the space. It was the canary in the coal mine, a sign of stress in the crypto space even before all the blow-ups this year,” Darius Sit, founder, and chief investment officer at crypto options trading firm QCP Capital, said. Sit said his firm would monitor the yields as a “possible leading sign of recovery.”
The bankruptcy of FTX took everyone by surprise and the proceedings are still very early. It should be noted that the exchange’s collapse is bound to fuel a more notable contagion as predicted by experts in space and this contagion is bound to be seen in the coming weeks.
Investors’ trust in the industry is still tainted and the ecosystem will need ample time to get off this mirage and return back to profitable days.
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