As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
1. SEC INVESTIGATES CRYPTO SALE: The Securities and Exchange Commission is investigating a company's $50M cryptocurrency sale, looking in particular at whether a prominent bitcoin entrepreneur violated the law by getting involved with the company's fundraising, the Wall Street Journal reported Thursday. Erik Voorhees, the entrepreneur in question, is the chief executive officer of ShapeShift, a digital-asset exchange that suspected criminals have used to launder millions of dollars in allegedly questionable gains. Authorities in the U.S. and abroad have examined ShapeShift's role in processing assets in several criminal cases. Now, the SEC is probing a different company that has been affiliated with Voorhees, Salt Lending Holdings, which loans money to people using their cryptocurrency as collateral. The company received a subpoena from the SEC earlier this year seeking records related to a $50M digital-token sale it held a year ago.
2. NVIDIA’S CRYPTOCURRENCY HANGOVER: Along with its third quarter earnings report on Thursday, Nvidia (NVDA) forecast Q4 revenue that fell short of Wall Street’s expectations as the company works through excess inventory from the cryptocurrency boom. “The crypto hangover lasted longer than we expected,” CEO Jensen Huang said on the company’s earnings call. “This is surely a setback, and I wish we had seen it earlier.” Following the report, several analysts lowered their price targets on the stock. On Friday, Stifel analyst Kevin Cassidy cut his price target on the shares to $200 from $250, stating that while he believes most investors were expecting some downside, the company's quarterly results and guidance were well below his estimates as the "cryptocurrency GPU card bust reported by AMD (AMD) last month hit Nvidia also." Cassidy agrees with the company that this is likely a one to two quarter inventory adjustment and expects Turing GPUs to gain adoption as ray tracing is included in more gaming titles. He kept a Hold rating on Nvidia shares, citing valuation, but said he is "constantly looking for attractive entry points" and expects "some correction" in valuation following this report.
3. BITCOIN MARKET CAP DROPS BELOW $100B: Bitcoin’s market capitalization dropped below $100B on Thursday, a level not seen since October 2017, amid a selloff in cryptocurrency markets which started on Wednesday, CNBC reported. According to Coinmarketcap.com, Bitcoin’s market cap stood at $98,194,458,586 as of Thursday morning and the total cryptocurrency market capitalization was at $186,275,052,509, representing a fall of $15B over 24 hours Wednesday. Brian Kelly, CEO of digital currency investment firm BKCM, told CNBC's "Fast Money" that he believed that steep drop had to do with bitcoin cash, which splintered off in August 2017 from bitcoin with the aim of being able to process more transactions. Bitcoin cash is doing a "hard fork" or "effectively a software upgrade,” he said. “When you do a software upgrade, everybody usually agrees. But in this particular case, everybody is not agreeing. So, we've got ourselves a 'crypto civil war.'” He added that some traders have concerns that markets would run into a slowdown or "chaos" after the upgrade. "People started selling. That triggered stops. Everybody got concerned," he said.
4. IDEANOMICS CEO TO DEPART: Ideanomics (IDEX) announced Wednesday that Alex Yao has been named as chairman of the board and Brett McGonegal has been named the company's CEO. The Ideanomics management team and board met with current CEO Bruno Wu to discuss the opportunity of his leading the China-US relations committee. Although Wu will be participating in a non-governmental organization, the level of interaction with government officials means that Wu cannot remain as the chairman and CEO of a U.S. public company. As such, he will be stepping down from his positions at Ideanomics and will concentrate on the role as an ambassador for the benefit of improved relations between China and the U.S. Wu will remain as special advisor to the board of Ideanomics and will continue his current role as chairman and CEO at Sun Seven Stars', his private, family-held, media and investment company which will remain as the largest shareholder of Ideanomics.
5. ECB OFFICAL CALLS BITCOIN ‘EVIL SPAWN OF THE FINANCIAL CRISIS’: Benoit Coeure, a member of the Executive Board of the European Central Bank, called bitcoin “the evil spawn of the financial crisis” and said issues with the digital currency are "plentiful," the Financial Times reported Thursday. "Lightning may strike me for saying this in the Tower of Basel -- but bitcoin was an extremely clever idea. Sadly, not every clever idea is a good idea," he said. "I believe that Agustín Carstens summed its manifold problems up well when he said that bitcoin is ‘a combination of a bubble, a Ponzi scheme and an environmental disaster.'"
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices and Nvidia in select research. Overstock (OSTK), DPW Holdings (DPW), Kodak (KODK), Ideanomics, Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin was dropped about 12.7% this week to $5,562 in U.S. dollars, according to CoinDesk.
AMD
-0.83 (-3.86%)
Nvidia
-34.9 (-17.22%)
Bitcoin
+ (+0.00%)
Bitcoin
+ (+0.00%)
Ideanomics
+0.03 (+1.69%)
OSTK
+
Ault Global Holdings
-0.0339 (-11.53%)
Eastman Kodak
-0.03 (-0.76%)
Riot Platforms
+0.125 (+5.57%)
Pareteum
-0.045 (-2.23%)
Srax
+ (+0.00%)