Options Corner: Monetary Policy Turmoil Hands Over A Contrarian Case For Coinbase
A plummeting cryptocurrency market has hit blockchain-adjacent enterprises hard, with Coinbase Global Inc (NASDAQ:COIN) being one of the more prominent victims. Because the company’s success is directly tied to the health of cryptos, it wasn’t surprising that COIN stock plunged. However, the bigger issue is the Federal Reserve, which is pensive about its monetary policy. Despite the turmoil that this matter has caused, there may be reason for optimism.
Granted, it’s been a rotten week for the equities sector. In the trailing five sessions, the S&P 500 is down 2%, while the tech-centric Nasdaq Composite slipped about 2.5% during the same period. Even mighty Nvidia Corp (NASDAQ:NVDA), which delivered another blockbuster quarterly performance and raised outlook, could not lift Wall Street.
Primarily, the culprit appeared to be a hotter-than-expected U.S. jobs report. While such a print would have been considered great news in most other contexts, it also dampened enthusiasm for a December rate cut. As such, risk-on sentiment faltered as investors readjusted their expectations in light of the new information.
Nevertheless, the nuance here is that the labor market is still relatively weak. Even amid the positive surprise in the latest jobs reading, the unemployment rate edged up from 4.3% to 4.4% — marking the highest level since October 2021.
To be fair, oddsmakers have pegged about a 35% chance of a quarter-point cut from the Fed next month. That’s not great but it’s far from a consensus expectation. In a note to CNBC, Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, stated that a “December cut remains possible given continued labor market softness as expressed by the unemployment rate.”
Yes, COIN stock losing 30% in the trailing month is downright hideous. Still, there’s also reason to believe in the contrarian case.
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