The collapse of a cryptocurrency brokerage firm, the “baby” of Sam Bankman-Fried, sent shockwaves throughout the crypto universe and beyond.
“Beyond” includes one former FTX client suing the NBA’s Golden State Warriors due to the team’s marketing partnerships with the now-bankrupt crypto firm. The point is, the rapid demise of FTX and Bankman-Fried’s fall from grace are having a contagion effect, prompting market participants to question what will be the next crypto shoe to drop.
Problem is, in recent days answers are coming fast and furious, and there’s lingering legal fallout from the FTX debacle. As just one example, the state of Texas is examining the roles NFL star Tom Brady and Warriors’ star Stephen Curry may have played in drumming up business for FTX as paid celebrity endorsers. Quality is now more desirable than ever in the crypotcurrency universe, but it’s also difficult to find.
The Invesco Alerian Galaxy Crypto Economy ETF (SATO ) is an example of an exchange traded fund that, while not perfect, has some quality crypto traits. In fact, the aforementioned contagion risk is pinching some SATO components, such as Coinbase (NASDAQ:COIN).
“Questions have been swirling about the health of FTX’s rival exchanges, sparking industrywide sell-offs that have caused some companies to temporarily suspend trading, and others to prepare potential bankruptcy filings. Mizuho analysts wrote in a note on Friday that daily volumes in the industry are trending 30% to 40% below their average for the year,” reported Ashley Capoot for CNBC.
The bottom line is that Coinbase could be a baby being thrown out with the FTX bathwater, and Coinbase CEO Brian Armstrong recently informed investors that the company has no material exposure to FTX.
So while Coinbase isn’t free of contagion at the moment, a variety of other SATO components do satisfy the objective of delivering crypto exposure while not subjecting investors to volatile situations such as FTX. For example, Block (NYSE:SQ) and PayPal (NASDAQ:PYPL) certainly fit the bill as crypto-correlated stocks, but are companies with strong business models and solid leadership teams. It’d be stunning to see either be an FTX sequel.
Additionally, plenty of other SATO holdings are relevant in the crypto conversation, but they should not be tarnished with the FTX brush. Those include Dow components JPMorgan Chase (NYSE:JPM), Microsoft (NASDAQ:MSFT), and Visa.
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