Crypto-share gains: these digital assets leading the interest rate fluctuations victory
In a move that could accelerate the growth of the cryptocurrency and trading markets, the Federal Reserve recently cut interest rates by 25 basis points, bringing the range to 4.00 to 4.25 percent. This decision has sent leading cryptocurrencies jumping around two percent upon the announcement, and operators of trading platforms like Coinbase are at the forefront of the winners due to the rate cut.
Traditional safe havens like government bonds yield less due to the rate cut, leading investors to seek alternatives and shift capital into stocks and crypto markets. As a result, trading activity, an indicator of revenue from fees, tends to increase when mortgage rates are lower. This is particularly beneficial for companies like Coinbase and Robinhood, identified by Mizuho analysts as companies poised to benefit most from the new monetary policy.
Mizuho analysts have raised the price target significantly for Coinbase, from $267 to $300, despite maintaining a "Neutral" rating. The bank sent a clear buy signal for Robinhood and eToro, both rated "Outperform". However, the outlook for Circle is much more pessimistic, with a "Underperform" rating and a price target of just $84.
Mizuho identifies Circle, the issuer of the USDC stablecoin, as a potential loser from the rate cut due to its business model relying on interest income from reserves (primarily US Treasury bonds). With lower traditional yields, Circle's business model will see decreasing earnings, directly headwinds for the company.
Investors remain on board with both Robinhood and Coinbase stocks, with DER AKTIONÄR having been bullish on Robinhood and Coinbase for some time. The Robinhood position in DER AKTIONÄR's portfolio has risen by 403% since inception. Coinbase's WKN is A2QP7J.
The Fed's decision to lower interest rates could also accelerate the growth of decentralized credit platforms and drive stablecoin usage. Lower traditional yields make DeFi protocols, which often offer 5-10% annual yields, more attractive. However, Circle, which is not currently active in DER AKTIONÄR's portfolio, may struggle due to the changing landscape.
Investors are advised to closely monitor the developments in the cryptocurrency and trading markets in the wake of the Fed's rate cut. The lower mortgage rates could provide a significant boost to companies like Coinbase and Robinhood, but stablecoin issuers like Circle may face challenges.
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