A volatile session has whipsawed bitcoin (BTC) and crypto-related stocks such as Coinbase (COIN) and MicroStrategy (MSTR) after Binance CEO Changpeng Zhao announced the outline of a deal for his exchange to purchase rival FTX.
Bitcoin (BTC), which had sunk to the low-$19,000 area this morning, bounced back to $20,500 after the deal was disclosed, but is now down over 12% to around $18,257. Ether (ETH) also fell, by over 15% to $1,340.
Equities showed a similar pattern, with Coinbase falling about 13% and MicroStrategy (dropping over 23%. And video game retailer GameStop fell almost 5%. In September, GameStop said it would be partnering with FTX.US to promote interaction between the gaming and crypto communities.
Brokerage Robinhood (HOOD) – in which FTX CEO Sam Bankman-Fried owns a 7.6% stake – sunk almost 19%. There were reports circulating in June that FTX was exploring whether it could purchase the company. However, a month later, Robinhood's chief executive officer tried to shut down the speculation, saying he has money to do his own deals.
Analysts are mixed on the Binance-FTX deal implications for other crypto exchanges and brokerages including Coinbase and Robinhood.
"Although the knee-jerk reaction is that HOOD will be impacted we note that unlike COIN, Robinhood only has 14% of total revenue from trading crypto tokens. It is far more diversified than COIN with equities and options trading," Mizuho analyst Dan Dolev said in a research note to clients Tuesday. Dolev added that he doesn't see Coinbase garnering an influx of customers, saying the "rapid fall from grace of a crypto exchange demonstrates how fickle the crypto industry could be." Mizuho rates Coinbase with neutral and Robinhood with a buy.
Separately, Needham's John Todaro sees some early positives for Coinbase, saying in a note that "distractions and withdrawals from FTX could lead to new customer gains for COIN" near-term. He cautioned, however, that crypto price declines and increased crypto investor concerns could lead to dampened crypto interest. Needham rates Coinbase with a buy rating.
The speculation over Bankman-Fried's FTX started after CoinDesk reported last week that a notable portion of sister company Alameda's balance sheet was made up of FTT, which is the FTX exchange's in-house token.
Regarding what could be next for Sam Bankman-Fried and his team, the firm would "shift focus to the U.S. market, where they have been spending disproportionate time in the last few months," Bernstein analyst Gautam Chhugani said in a note to clients. "However, they lose the cash machine of the FTX international exchange, which was enabling investments in the U.S. entity," Chhugani wrote, adding that a regulatory presence would also lessen.
UPDATE (Nov. 8, 18:09 UTC): Added analyst commentary on Coinbase and Robinhood.
UPDATE (Nov. 8, 19:25 UTC): Added a comment from Bernstein's research team and updates market moves.
UPDATE (Nov. 8, 19:51 UTC): Updates market moves.
UPDATE (Nov. 8, 1:29 UTC): Added more details of Robinhood and FTX relationship.
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