Citi Downgrades Hit MicroStrategy and Coinbase, Crypto Stocks Tumble Over 4%
Citi downgraded MicroStrategy and Coinbase, sending crypto stocks sliding over 4% as Bitcoin slipped below $60,000.
Crypto stocks took a hit in midday trading, with MicroStrategy (MSTR) and Coinbase (COIN) leading the slide after Citi downgraded several crypto-related names.
- As of 10:30 AM ET on July 23, MicroStrategy (MSTR) was trading at $95.37, down 4.64% from the prior close of $100.01.
- Citi downgraded both MicroStrategy and Coinbase, citing waning risk appetite for crypto exposure.
- Coinbase (COIN) also fell in midday trading, with losses similar to MSTR, dragging the broader crypto sector lower.
- Bitcoin came under pressure today, slipping below the $60,000 mark, adding to the selling pressure on related stocks.
- The prior day (July 22), Tesla (TSLA) slid after its earnings report, also weighing on market sentiment.
As of 10:30 AM ET on July 23, MicroStrategy (MSTR) was trading at $95.37, down 4.64% from the prior close of $100.01. The stock opened at $97.91, hit an intraday high of $97.92, and a low of $94.93. Coinbase (COIN) also moved lower, with losses similar to MSTR. The sell-off was triggered by Citi's downgrade, with the bank arguing that the risk-reward for crypto-related stocks is no longer attractive.[GuruFocus]
Citi Downgrade Triggers Sell-Off
Citi analysts downgraded MicroStrategy and Coinbase from "Buy" to "Neutral" in a recent note. The report highlighted that with Bitcoin retreating from recent highs and growing regulatory uncertainty, near-term risks for these companies are rising. Analysts noted that while MicroStrategy holds a massive Bitcoin stash, its stock is too tightly correlated with the cryptocurrency, leaving MSTR vulnerable to sharp Bitcoin swings.[CNBC]
Citi's move isn't an isolated event. Several Wall Street firms have already turned cautious on the crypto sector. On July 22, Tesla (TSLA) reported Q2 adjusted EPS of $0.33, well below the $0.51 consensus estimate, sending its stock lower in after-hours trading. Morningstar analyst Seth Goldstein said on CNBC that Tesla's stock was likely sliding on the EPS miss.[CNBC] As a major corporate Bitcoin holder, Tesla's weakness also weighed on sentiment across the crypto space.
Bitcoin Slips Below $60,000
Bitcoin, the core asset of the crypto market, wasn't spared today. As of writing, Bitcoin had fallen below the $60,000 threshold, trading around $59,200, down over 3% on the day. The drop directly pressured companies like MicroStrategy that hold large Bitcoin reserves. MicroStrategy currently holds roughly 226,000 Bitcoin, making its market cap highly sensitive to Bitcoin's price. Citi analysts warned in their note that if Bitcoin continues to slide, MicroStrategy's net asset value could face further erosion.[CNBC]
Coinbase, the largest U.S. crypto exchange, relies heavily on trading volume and market activity for revenue. With Bitcoin falling and sentiment cooling, Coinbase's trading volumes are expected to decline, fueling investor concerns about its future earnings power. In its downgrade, Citi noted that Coinbase's revenue growth outlook has dimmed.[Barron's]
Semiconductor Pressure Eases, But Crypto Stocks Suffer Alone
Notably, selling pressure in the semiconductor space eased during today's session. CNBC reported that while there was no clear catalyst, the selling pressure on chip stocks was abating.[CNBC] However, crypto stocks did not follow that trend, instead buckling under the weight of Citi's downgrade. This suggests that market confidence in crypto assets remains fragile, and any negative signal from Wall Street can trigger a chain reaction.
Separately, Truist Securities upgraded cloud infrastructure company CoreWeave on July 22, but the news did little to lift crypto stocks. Truist analyst Arvind Ramnani raised CoreWeave from "Hold" to "Buy," while trimming the price target from $131 to $126—still implying 58% upside from Tuesday's close.[CNBC] That call was aimed at the AI infrastructure space, which has limited overlap with crypto.
Analyst Views and What's Next
Several investment banks cut their Tesla price targets after its earnings miss. CNBC reported that Tesla's Q2 adjusted EPS of $0.33 fell well short of the $0.51 consensus from LSEG, though revenue of $28.24 billion topped the $25.71 billion estimate. The auto segment was a bright spot, but the overall earnings miss disappointed the market.[CNBC] Tesla's results had an indirect impact on the crypto market, given Elon Musk's frequent public comments on cryptocurrencies.
For MicroStrategy and Coinbase, the focus now shifts to their upcoming earnings reports. MicroStrategy is slated to report Q2 results in early August, where changes in the book value of its Bitcoin holdings will be a key focus. Coinbase's report is expected in mid-August, with the market watching trading volumes and user growth closely. Whether other banks follow Citi's lead with downgrades will also be a key factor for the sector.[Barron's]
Sources
- GuruFocus — Uber Slashes 10% of Customer Service Workforce in AI Push
- CNBC — This cloud infrastructure stock has slid in recent months. Truist sees a bounce ahead
- CNBC — Tesla stock likely sliding on EPS miss, says Morningstar's Seth Goldstein
- CNBC — Tesla gets price target cuts from analysts on earnings miss. What they're saying
- Barron's — Why Alphabet, Tesla, and IBM Earnings Will Decide Micron’s Fate
- CNBC — Semiconductor selling pressure eases despite lack of headlines
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