Bitcoin Prices Decline as Tesla Sells Bitcoin and Crypto Stocks Struggle
The month of August has been rough for cryptocurrency investors as Bitcoin prices continue to drop. This decline in value has prompted Tesla, the electric vehicle company led by CEO Elon Musk, to sell off its Bitcoin holdings. Additionally, various crypto-related stocks have struggled to maintain their momentum amidst the falling prices.
On August 18, Bitcoin’s price fell by 1.94% to reach $26,109.90. This comes after a period of rallying in the month of July. It is worth noting that this isn’t the first time Tesla has sold off its Bitcoin holdings. In fact, last year the company sold $936 million worth of the digital currency. In its recent quarterly earnings report, Tesla disclosed that the value of its digital assets remained unchanged at $184 million.
Other crypto-related stocks such as Riot Platforms, Marathon Digital, and Coinbase have shown similar trading patterns. Each of these stocks experienced a breakout in June or July, reaching their highest levels in over a year. However, they began to pull back in the week ended July 21, coinciding with the decline in the price of Bitcoin.
Riot Platforms, in particular, has diversified its operations with a power supply contract with Texas energy provider TXU Energy Retail Co. This contract allows Riot to sell electricity to power the state of Texas, providing a small source of revenue in a time when the crypto-mining industry is facing low prices for its core asset. Riot also generates revenue by providing engineered electrical equipment products to third-party customers and offering data-center hosting for institutional customers.
While Riot Platforms has seen a 5% increase in revenue in its most recent quarter, it has yet to post a profit. Analysts do not expect the company to turn a profit in the next two years. Similarly, Marathon Digital’s strategy revolves around producing and holding Bitcoin as a long-term investment. The company aims to diversify its income sources and explore opportunities in ancillary businesses related to bitcoin mining. Despite narrowing its losses in the most recent quarter, Marathon’s stock has declined by 32.90% in the past month, indicating strong downside momentum.
Coinbase, the largest U.S.-based cryptocurrency exchange, has also been affected by the declining prices of cryptocurrencies. However, Coinbase’s business model doesn’t rely on mining cryptocurrencies like smaller bitcoin companies. This flexibility allows Coinbase to weather downturns in the price of digital assets. The company has been trimming expenses and focusing on recurring revenue, such as custodial fees and interest income, rather than relying solely on trading revenue. Coinbase aims to maintain a diverse income stream to withstand market fluctuations.
Though Coinbase faced scrutiny from regulators, including a hefty payment to settle allegations of violating money-laundering laws, the company’s most recent quarterly revenue reached $707 million. Investors interested in Coinbase should closely monitor the stock as it begins to turn higher again, ensuring they have appropriate insurance due to the volatility of the cryptocurrency market.
Overall, the decline in Bitcoin prices and the selling off of Bitcoin holdings by Tesla have significantly impacted the crypto market. While some analysts anticipate a potential rebound in the near future, others believe that crypto-related stocks may continue to struggle for a longer period. Investors should exercise caution and closely monitor market conditions to make informed decisions.
