Bitcoin's selloff sends crypto-related stocks sharply lower

By Tomi Kilgore

MicroStrategy's stock heads for 5th straight loss, Coinbase shares drop toward 7-week low

Shares of cryptocurrency related companies were hit hard Friday, as bitcoin sank to more than four-month lows amid concerns that the repayment plan of bankrupt crypto exchange Mt. Gox's repayment plan will lead to more selling.

Bitcoin (BTCUSD) sank 7.3%, putting it on track for the lowest close since Feb. 26. It has now tumbled 25.2% since closing at a record $73,798 in mid-March.

Read: Bitcoin may head towards $50,000 as the crypto falls to a four-month low.

Coinbase Global Inc.'s stock (COIN) dropped 5.1%, putting it on track to open around the lowest closing prices seen in seven weeks.

The cryptocurrency exchange said in its latest quarterly filing that as of March 31, it held 9,183 bitcoin for investment, with a cost basis of $270.4 million and fair value of $664.7 million.

The company has said in its filings that future profitability may depend on the market price of bitcoin.

Shares of MicroStrategy Inc. (MSTR) sank 5.2% ahead of the open toward a two-month low, and was headed for a fifth straight loss.

The business-analytics software company's stock trades more like bitcoin than the shares of its software peers because it adopted the digital currency as its primary treasury reserve asset in 2020.

Don't miss: MicroStrategy explains by bitcoin is better than stocks, bonds or gold.

As of March 31, the company said it held 214,278 bitcoin, and the carrying value of its digital assets was $5.07 billion.

Since then, the company has issued more convertible debt so it can buy more bitcoin.

J.P. Morgan said in a recent note to clients that it estimates MicroStrategy has spent a total of about $8.3 billion to buy bitcoin over the years, with about 40% of that - $3.4 billion - spent over the past three quarters alone.

"As mentioned before in our publication, we believe debt-funded bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and raise the risk of more severe deleveraging in a potential downturn in the future," J.P. Morgan analysts wrote.

Elsewhere, shares of cryptocurrency mining company Marathon Digital Holdings Inc. (MARA) shed 6.1% and crypto miner Riot Platforms Inc.'s stock (RIOT) dropped 5%.

And shares of Robinhood Markets Inc. (HOOD), the financial services platform that offers crypto-trading services, slid 2.9%.

-Tomi Kilgore

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07-05-24 0728ET

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