The overall risk-off environment has triggered relentless selling in crypto assets since the beginning of the year. The most popular cryptocurrencies, Bitcoin and Ethereum, are down more than 60% year-to-date.

The stubborn inflation has resulted in a third consecutive 75 basis point interest rate hike by the Fed. The central bank maintains its hawkish stance, with officials raising the key rate prediction for this year to 4.25% to 4.5% from the previously projected 3.25% to 3.5%.

Rising interest rates have led to fears of a recession by the start of next year. This is expected to keep the risky markets under pressure in the upcoming months. Moreover, the strong U.S. dollar and the looming midterm elections could dampen the crypto market. Many experts believe that we are in the midst of a “crypto winter,” which means a prolonged bear market in the crypto space.

DBX Digital Ecosystem’s CEO Igor Zakharov said, “The crypto market was already feeling the effect of world events, especially the Russia-Ukraine conflict that caused turmoil in global finance.” “By the time TerraUSD and Luna collapsed and set in motion a domino effect in the crypto world, crypto winter had already begun,” he added.

Investors’ bearish stance on crypto is evident from the ProShares Bitcoin Strategy ETF’s (BITO) 59.3% decline year-to-date.

Given this backdrop, we think it could be wise to avoid fundamentally weak crypto-exposed stocks Block, Inc. (SQ), Coinbase Global, Inc. (COIN), and Riot Blockchain, Inc. (RIOT).

Block, Inc. (SQ)

SQ is a technology company that creates tools that enable sellers to accept card payments and provide reporting, analytics, and next-day settlement. The company focuses on financial services. Also, its building block comprises Square, Cash App, Spiral, TIDAL, and TBD54566975. SQ is building an open bitcoin mining system to diversify beyond its payment business.

SQ’s total net revenue declined 5.9% year-over-year to $4.40 billion for the second quarter ended June 30, 2022. The company’s operating loss came in at $213.77 million, compared to an operating income of $124.99 million in the year-ago period.

Also, its net loss came in at $208.01 million, compared to a net income of $204.02 million in the year-ago period. In addition, its loss per share came in at $0.36, compared to an EPS of $0.40 in the year-ago period.

Analysts expect SQ’s EPS for the quarter ended September 30, 2022, is expected to decline 37.4% year-over-year to $0.23. Its revenue for fiscal 2022 is expected to decline 0.5% year-over-year to $17.57 billion. Over the past year, the stock has declined 76.3% to close the last trading session at $56.14.

SQ’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has a D grade for Stability, Sentiment, and Quality. It is ranked #89 out of 105 stocks in the F-rated Financial Services (Enterprise). Click here to see the other ratings of SQ for Growth, Value, and Momentum.

Coinbase Global, Inc. (COIN)

COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The company offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.

On August 9, 2022, COIN announced that it was facing a federal investigation for the possible sale of unregistered securities. If the ongoing investigations against the company are true, it could seriously affect its business model while being subjected to various sanctions and hefty fines.

COIN’s revenue for the fiscal second quarter ended June 30, 2022, declined 63.7% year-over-year to $808.32 million. Its total operating expenses increased 36.9% year-over-year to $1.85 billion. 

The company’s net loss came in at $1.09 billion, compared to a net income of $1.61 billion in the year-ago period. Also, its loss per share came in at $4.98, compared to an EPS of $6.42 a year ago.

For the quarter ending September 30, 2022, COIN’s EPS is expected to be negative. Its revenue for the quarter ending December 31, 2022, is expected to decline 70.8% year-over-year to $728.86 million. The stock has declined 72.3% year-to-date to close the last trading session at $69.95.

COIN’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.

It has an F grade for Growth, Value, Stability, and Sentiment and a D for Quality. Within the F-rated Software – Application industry, it is ranked last out of 148 stocks. To see the other rating of Momentum for COIN, click here.

Riot Blockchain, Inc. (RIOT)

RIOT is involved in cryptocurrency mining and the overall blockchain system through various investments. The company has deployed approximately 8,000 application-specific integrated circuit miners at its cryptocurrency mining facility in Oklahoma. In addition, its subsidiary Tess Inc. seeks to develop a blockchain-based escrow service for wholesale telecom carriers.

For the fiscal second quarter ended June 30, 2022, RIOT’s net loss came in at $366.33 million, compared to a net income of $19.33 million. Its adjusted EBITDA loss came in at $65.17 million, compared to an adjusted EBITDA of $2.38 million. The company’s adjusted loss per share came in at $0.50, compared to an adjusted EPS of $0.03.

For the current quarter, RIOT’s EPS is expected to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has lost 75.9% to close the last trading session at $6.14.

RIOT’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Stability, Sentiment, and Quality and a D for Value. It is ranked #77 out of 78 stocks in the D-rated Technology – Services industry. Click here to see the other ratings of RIOT for Growth and Momentum.

SQ shares were trading at $52.58 per share on Thursday morning, down $3.56 (-6.34%). Year-to-date, SQ has declined -67.44%, versus a -24.88% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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