Bitcoin loses 2% as investors cash in on Coinbase profits

Cryptocurrency-related equities slipped Wednesday after the open as bitcoin and ether struggled to maintain recent momentum and investors whipsawed between risk-on and risk-off strategies ahead of the Federal Reserve Open Market Committee minutes release.

Bitcoin (BTC) and ether (ETH) were down around 2.5% and 4%, respectively, at time of publication. Coinbase shares tumbled 5% while mining operations Marathon Digital and Riot Platforms dipped 5.4% and 3%, respectively.

The S&P 500 and Nasdaq Composite Indexes also edged lower, losing around 0.3% and 0.7%, respectively. Earnings season is coming to a close — 79% of S&P 500 companies have already reported — and investors are parsing through what analysts say have been largely unremarkable reports.

“Q4 earnings season is hewing closely to long-run averages in terms of top and bottom line beat percentages, even if it is disappointing when measured against the more recent past,” said Nicholas Colas, co-founder of DataTrek Research. “It is, in other words, entirely normal. All this fits with our ‘mid cycle playbook,’ where there is little to surprise markets regarding corporate earnings power.”

FOMC minutes released Wednesday should provide some clarity for investors about what data central bankers need to see before they start cutting interest rates, analysts said. CME futures-priced probability of a May cut was hovering around 33% ahead of the release.

“As revision-prone as the Jobs Data has been over the last year, plenty of other indicators (Initial Claims, Atlanta Fed Wage Growth Tracker, Office Occupancy, Google Trends) point to a still-healthy labor market,” Colas said. “As long as that is the case, the risk remains that inflation is not well and truly vanquished.”

The selloff in Coinbase (COIN) comes after a largely positive earnings report from the crypto exchange earlier this month that saw shares rally almost 30% in a three-day period.

Coinbase reported a 41% revenue increase from last quarter to $954 million during the final months of 2023.

Investors cashed in on Coinbase profits, with three of Cathie Wood’s ARK ETFs selling a total of more than 875,000 Coinbase shares earlier this month.

Marathon Digital is slated to report earnings Feb. 28.

Investors should keep an eye out for machine upgrades ahead of bitcoin’s next halving, expected in April.

“What’s more, the number of new BTC entering the market every day is set to drop by 50% in late April, when the four-year halving reduces the rewards paid by the algorithm to miners,” said Noelle Acheson, author of the Crypto is Macro Now newsletter. “Previous halvings have been a bullish catalyst for BTC, as selling pressure from new supply is lessened — and this was even without the boost to demand from US listed spot ETFs and possibly soon similar products listed in Hong Kong.”

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