Bitcoin May Be Weighing on Tech Stocks Again. Investors Should Be Wary.
“Blame it on Bitcoin” may be a new catchphrase if the tech sector keeps sinking.
(ticker: NVDA) was down 8.1%, at $532.94, in recent trading amid a broader rout in the tech-heavy
index. The chip stock stands out because the company issued a strong earnings report Wednesday, including a lift from products related to Bitcoin and other cryptocurrencies.
(SQ), meanwhile, also continued its slide, down 4.3%, at $227.09. The company’s relatively strong earnings report on Tuesday included investments and operational gains from Bitcoin, and the firm said it plans to “double down” on the digital coin. That may be weighing on the stock, which is down nearly 20% in the last few sessions as Bitcoin prices have slumped.
Tech is under pressure for other reasons: Steep valuations have made the sector vulnerable to weakness in company forecasts. Rising bond yields pose a threat by pressuring the present value of future cash flows. Big Tech is also a crowded trade that could be losing favor as investors look for more-cyclical exposure or sectors with lower valuations.
But the trading patterns in Nvidia, Square,
(TSLA), and other stocks may also be a sign of Bitcoin’s growing influence. Companies are plowing capital into Bitcoin directly and related products and services, expanding exposure at a time when prices have skyrocketed more than 350% in the past year. Despite its recent slide, Bitcoin is still up 67% this year.
Crypto is certainly gathering momentum.
(MA) said this month that it would start supporting cryptocurrencies directly on its network, noting that many consumers are already using cards to buy crypto assets. But it would still be a stretch to turn Bitcoin into a viable currency for everyday purchases, a
executive noted at a conference on Thursday.
“Bitcoin doesn’t behave like a payment instrument,” said Mastercard Executive Vice Chair Ann Cairns, according to a report on MarketWatch. “It’s too volatile and it takes too long to transact.”
Whether it becomes an asset class or payment instrument, the rise (and potential fall) of Bitcoin is ripping through corners of tech, banking, and other sectors.
Nvidia, for instance, issued an impressive earnings report, as…