AltFi Fintech Index sees third negative month in a row, falls 3.2%

Just over a quarter of the index’s 47 constituents (13 or 27 per cent) produced positive returns in April.

Image source: Pexels/Yan Krukau

April is the cruelest month, according to TS Eliot’s The Waste Land poem, and despite global stock markets rising in the month, the banking sector’s problems continued to worsen in the month.

AltFi Fintech Index, which tracks approx. 50 listed companies at the center of financial innovation saw a drop of 3.2 percent in April. This is the third monthly fall in a row after a jump of 20.1 percent in January.

As with recent months, the index’s relatively muted move overall masked huge swings for some of its constituents.

Of 47 constituents in the index, 34 lost money in April.

A total of 15 companies in the AltFi index fell by more than 10 per cent.

Worst affected were BlendLabs (-38.2 per cent), MoneyLion (-34.5 per cent) and Coinbase (-25.8 per cent).

Just over a quarter of the index’s 47 constituents (13 or 27 per cent) produced positive returns in April. Three of these companies – Adyen, Enova and Payoneer – had a return of less than 1 percent.

However, three companies received an outsized return.

Stoneco, a cloud payments company backed by Warren Buffet’s Berkshire Hathaway, rose 30.4 percent.

Northern Data, a German provider of data centers to the crypto and blockchain industries, as well as other high-growth sectors such as artificial intelligence, saw a whopping 43 percent return.

This made it the second best performing stock in the index after being the best performing the previous month.

Top with a return of 47.4 percent was Sunlight Financial, a provider of loans to homeowners looking to install solar panels.

Nubank was another solid performer in April after it revealed impressive results for the first quarter, incl.

Macro movements

The fall in the AltFi Fintech index comes in contrast to a rise in global markets

with an increase of 1.8 per cent for the MSCI World Index.

Investor optimism began to gather, according to analysts at Schroders, as anticipation of the Federal Reserve moderating monetary policy, although that was somewhat dampened “by the central bank flagging that economic growth is likely to slow”.

Invesco ETF’s April European demand said “April was a quiet month for markets in terms of performance, with all major asset classes posting modest gains.”

However, uncertainty in the banking sector began to become further entrenched, especially for smaller US banks. Larger American banks in the S&P 500 index generally made upward progress in the month of April.

“The collapse of First Republic looked inevitable at the end of April, and its demise represented the biggest casualty yet unleashed by 2023’s simmering stress in the banking sector,” Schroders said.

The bank was eventually acquired in a deal between the US government and JPMorgan.

Schroder’s analyst team notes that the US regional banking crisis raises questions “about how the digital asset industry should interact with the traditional banking system”, given that all three banks that closed in 2023 were involved in the industry to varying degrees.

“US regulators continued to focus on the industry and ultimately this is likely to lead to more clarity on the regulatory front.”

Despite this, digital asset markets are the bright spot for investors in 2023, a partly likely driver of Northern Data’s gains in April. Bitfarms, a crypto miner also in the index, posted a decent return in April as well, rising 16.9 percent as Bitcoin and Ethereum returned 2.9 percent and 3.5 percent respectively in April.

“Digital assets are one of the best-performing asset classes in 2023, as Bitcoin is up 71 percent year-to-date. Bitcoin’s outperformance was idiosyncratic as liquidity shifted in the face of bank insolvencies, Schroders.s said

“The next milestone of the Ethereum upgrade was successfully completed this month, removing locked tokens for the first time in years. The added liquidity had no negative price impact,” Schroders added.