Crypto’s blaring alarms

Ready for the weekend??Phil Rosen here, writing to you from behind a cup of joe in California.?

It's no accident coffee's among the world's most traded commodities. It's got a distinct taste and aroma, and people rely on its energizing effect.

That's almost the opposite of crypto, which can hardly be said to "exist" at all.?

Investors are realizing that, behind all of the marketing intrigue, there isn't much there. The only thing propping up prices may just be the Greater Fool Theory – there's always someone willing to buy at a higher price.

Those realizations came to head repeatedly in 2022 as?crypto hacks?and a wintry bear market crescendoed with the collapse of Sam Bankman-Fried's?FTX.?

While my boring black coffee's worth only a couple bucks, it hasn't lost anywhere near the value tokens have in recent months.?

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1. Red flags for digital assets continue to emerge,?and Thursday served as a good reminder that the rock-bottom mood in the cryptosphere is still here. As Insider's Matt Fox writes, confidence?continues to shrink?amid the FTX fallout. On a macro level, persistent recession fears make speculative assets such as tokens or tech stocks less enticing.

Coinbase stock is one alarm ringing loudly. Shares of the crypto exchange dropped near an?all-time low?yesterday, and remain roughly 92% lower from its record high reached in April 2021.

"Coinbase's monthly trading volumes?have seen a fairly consistent drawdown each subsequent month since November 2021," Cowen analyst Stephen Glagola said in downgrading the stock. "[T]here remains low visibility into either a stabilization or?rebound in retail trading volumes?over 2023 given the macro backdrop and?FTX contagion risks?on crypto asset prices."

More notable is crypto bank Silvergate's?nearly 50% plunge Thursday, and the company's announcement it would?cut 40% of its staff.

The stock crash came as the Wall Street Journal reported that FTX's implosion sparked a bank run on Silvergate, and the firm was?forced to sell assets at steep discounts?to cover some $8.1 billion in withdrawals.

The $718 million Silvergate lost selling debt far?exceeds its total profits?from the past decade.?

Now the bank is under fire from a cadre of US senators?demanding answers from CEO Alan Lane for its business dealings with FTX and Alameda Research.

"Silvergate appears to be at the center of the improper transfer of billions in FTX customer funds. Americans need answers," Senator Elizabeth Warren said in a statement. "Those guilty of wrongdoing must be held accountable."

Other crypto-friendly banks?have followed in kind. Since October, Signature Bank is down about 30%, Customers Bancorp is roughly 15% lower, and Metropolitan Bank Holdings has notched a 12% dip.

What's the most likely outcome for the crypto sector in 2023? Let us know in the comments.

In other news:

2. Goldman Sachs said these 20 stocks are poised for up to 50% upside over the long term.?Sticky, high prices are set to cool down in the coming months, and this batch of names could benefit from the Inflation Reduction Act, according to the bank.?Get the full list.

3. UBS strategists explained how to invest in China in 2023.?With Beijing's zero-COVID policies coming to a dramatic end, markets are whipsawing in response and the domestic economy is gearing up for revival.?Find out what the firm said it means for investors.?

4. This 30-year-old built a seven-figure net worth.?He recommends investing in what you know, as that's what he did to become a self-made millionaire.?These are four of his investing principles that anyone can follow to build wealth.

5. Bed Bath & Beyond cratered Thursday.?The company said it's considering a slate of options to move its faltering business forward —?and that includes filing for bankruptcy.?

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This newsletter was curated by Phil Rosen.