Recent reports for the fourth quarter of last year have severely damaged the market rates of giants in our industry. The charts temporarily turned red, and the stock market smelled of panic, similar to what we have been observing in cryptoassets for some time. But is it right? The message from the reports is quite clear: this sell-off is the result of skillful accounting, not failing fundamentals. Companies like Coinbase and Robinhood are still standing strong.
Big crypto companies record losses… only on paper?
At the end of February, the cryptocurrency market reacted nervously – and that’s an understatement. Some investors simply panicked. But the main culprit of this carnage is not the companies’ crumbling business models. It’s about accounting complexities and sudden mood swings – a classic in our backyard.
Let’s remember what market we are playing in, cryptocurrencies have been simply a rollercoaster for a long time. You like it and thrive in it, or you don’t like it and invest in something else.
This enormous variability often forces companies to include the so-called unrealized paper losses. So what if the core of the business is doing great and the cash flow is flowing in a wide trough, if the regulations require you to show a minus in Excel?
Coinbase and Robinhood continue to gain momentum
Let’s take Coinbase for example. The company closed the quarter on a low. Sounds bad? Probably, until we read into the details.
This loss was caused by the above-mentioned paper write-offs of assets. However, when we look at what actually generates real cash, i.e. subscriptions, services around stablecoins and derivatives, we see huge increases there.
The situation is similar with Robinhood. Yes, the platform is faced with increasing operating costs and a slight outflow of active users on a monthly basis. It’s hard to deny it. But on the other hand, the monetization of those traders who stayed on the platform is generating great numbers and revenues are climbing steadily.
Does Galaxy aspire to be a big crypto company?
The absurdity of the current stock market valuation is also clearly visible in the example of Galaxy.
The accounting decline in the value of funds held in the company’s treasury simply covered up the fact that their main platform was growing like a weed. And there is something else to add here.
Artificial intelligence infrastructure under the Helios banner. For Galaxy, this could be a real game changer and a completely new source of huge money. Mike Novogratz and his team have strong cards in hand – now they just need to time this game perfectly.
What conclusions do we draw from this? Yes, companies’ results on paper may sometimes look uninteresting.
However, if we look deeper into the bowels of these largest market players, the market image changes dramatically. The foundations are as solid as steel, and the leading crypto companies seem fully ready for what the next months will bring in this extremely volatile market.
