Robinhood and Coinbase shares end the month on a lower note

Shares of crypto-related companies such as Coinbase and Robinhood fell in February. Photo illustration of Fortune

February was a tough month for stocks, and an uncertain month for public companies in the crypto world.

After months of predicting that the Federal Reserve would cut interest rates in 2023, a series of rosy economic releases dashed those hopes for most investors in February.

The unemployment rate fell to 3.4%, the lowest point in 53 years, as consumers rushed back to stores to boost retail spending by 3% in January. All of that contributed to a rise in the Fed’s preferred inflation rate in January, the Commerce Department reported last week, after it had fallen for six straight months.

The warm economic figures and the fear of a half percentage point rate hike at the Fed’s next meeting in March weighed on stocks in February.

All the major indices ended the month lower. The Dow Jones Industrial Average closed down 4.2%, while the Nasdaq and S&P 500 fell 2.6% and 1.1% respectively in February.

Robin Hood

Robinhood, an online stock brokerage that also sells crypto, saw its shares fall 6.6% for the month, paring a 29% gain in January. Robinhood started the month with a $10.78 close and ended at $10.07.

The company has suffered in recent months from its association with Sam Bankman-Fried, the disgraced former CEO of crypto exchange FTX, who is now awaiting trial on fraud and conspiracy charges, among other things. Bankman-Fried owned a 7% stake in the company, amounting to about 55 million shares, which the government seized after his arrest.

Prosecutors argued in late January that the roundabout way in which SBF originally purchased the shares, through a foreign investment company with no ties to his companies, FTX and Alameda Research, “further indicates the steps the defendant has taken to conceal his criminal abuse of the FTX customer.” property.”

Robinhood approved a plan in early February to buy back millions of shares and is working with the Justice Department to do so. Although SBF’s holdings will no longer be in limbo, it will cost the company $541 million to get them back, based on Wednesday’s share price.

The company’s association with SBF has done it no favors as the Securities and Exchange Commission’s enforcement of crypto regulation heats up. The company received an investigative subpoena related to its crypto offerings in December, it disclosed in a public filing Monday.

Coin base

US-based crypto exchange Coinbase had a turbulent month, closing at $64.83, down 1.3% since the end of January. In the first two days of February, shares rose 24% after a federal judge dismissed a class-action lawsuit against it, but it was all downhill from there.

In early February, the SEC settled with Coinbase competitor Kraken over its staking program, which allows investors to use cryptocurrency to earn returns and help the blockchain function. The move has raised fears that Coinbase, which offers a similar betting program, could be the SEC’s next target. The company’s legal director, Paul Grewal, has argued that Coinbase’s staking product is “fundamentally different” from Kraken’s.

The company’s shares were driven by earnings in the fourth quarter, which were largely positive. Coinbase beat analysts’ expectations on both earnings and revenue, although the number of users declined. Facing Crypto Winter, shares have fallen dramatically from the 2022 peak of $196 exactly one year ago.