The risk vortex of crypto and bubble baskets The risk vortex of crypto and bubble baskets The risk vortex of crypto and bubble baskets

The risk vortex of crypto and bubble baskets

Equities 5 minutes to read
Picture of Peter Garnry
Peter Garnry

Head of Saxo Strats

Summary:  Our Bubble Stocks and Crypto & Blockchain baskets are the two worst performing baskets this month as these pockets of the market are currently going through a big realignment in terms of expectations. The Fed's new objective of getting inflation under control will accelerate tapering and led to several rate hikes next year. Combined with a significant fiscal drag next year, US growth stocks will be hit by both lower growth and higher discount rate on cash flows, the worst of all combinations. This means that growth stocks that can show a credible upward sloping path on operating margin will fare much better whereas growth stocks that will fail in delivering higher operating margin will experience more trouble.

Friday’s price action was not pretty. Despite strong economic figures from the US the 10-year yield declined and normally that would have been a positive for technology stocks, but instead Nasdaq 100 continued lower with our Bubble Stocks and Crypto & Blockchain baskets leading the declines. On Saturday, Bitcoin was down as much as 21.2% at the lows adding to the woes of these pockets of the market. We know from surveys that there is a large overlap in exposure between investors in growth/bubble stocks and cryptocurrencies and that it is people under the age of 35 that dominates the exposure.

Source: Saxo Group

The Crypto & Blockchain basket (see composition below) is down 12.7% in December making it the worst performer and if we see the Fed getting ahead of the curve hiking rates three times next year then it could take more steam out of the crypto industry. The recent high profiled listing of Bakkt through a SPAC is a crypto related company that we will soon release a more thorough analysis of. As the table below also show analysts remain bullish on the industry with a median price target 77% above current prices. The key risk for bubble stocks and crypto related assets this week is the US inflation report on Friday which could accelerate the market’s expectations of tapering and rate hikes if inflationary pressures remain stubbornly high.

NameSegmentMarket Cap (USD mn.)Sales growth (%)Diff to PT (%)YTD return (%)5yr return
Coinbase Global IncCrypto exchange57,169139.344.1NANA
Signature Bank/New York NYBank18,4879.722.2128.2110.5
MicroStrategy IncInvestment firm6,8965.138.562.4218.0
Galaxy Digital Holdings LtdCrypto services6,245NA83.5128.31,213.0
Silvergate Capital CorpBank4,36461.332.1121.0NA
Marathon Digital Holdings IncCrypto mining4,2744,562.564.1298.957.7
Bakkt Holdings Inc (*)Digital assets platform3,354NA114.929.3NA
Riot Blockchain IncCrypto mining3,3391,497.490.368.6659.6
Northern Data AGInfrastructure2,52362.720.726.8NA
Voyager Digital LtdCrypto broker2,1058,169.383.1234.0NA
Monex Group IncFinancial institution1,82775.350.4111.2182.7
Hut 8 Mining CorpCrypto mining1,553203.9102.8241.8352.1
Hive Blockchain Technologies LtdCrypto mining1,216395.3NA67.43,900.0
Bitfarms Ltd/CanadaCrypto mining1,1947.057.0220.0NA
Canaan IncInfrastructure1,040225.5NA2.2NA
Stronghold Digital Mining Inc (*)Crypto mining872NA132.3NANA
Argo Blockchain PLCCrypto mining690131.5127.5236.4NA
Coinshares International Ltd (*)Digital asset management586NA-7.3NANA
Bit Digital IncCrypto mining571NA69.9-62.4NA
Bitcoin Group SECrypto broker236138.7187.4-41.8626.8
DMG Blockchain Solutions IncInvestment firm1282.7104.158.11,533.3
Digihost Technology IncCrypto mining118NANA100.7NA
Taal Distributed Information Technologies IncBlockchain platform105NA139.549.0NA
Future FinTech Group IncBlockchain e-commerce852,555.0NA-35.1-83.6
Quickbit EU ABCrypto payment services59-27.2NA-18.1NA
Safello Group ABCrypto broker17NANANANA
Aggregate / median119,055135.176.568.0352.1
Source: Bloomberg and Saxo Group
* Added to theme basket on 29 October 2021
** Infrastructure segment means physical computing applications for crypto mining

Growth stocks have a profitability problem more than a growth problem

The selloff in growth stocks have many liquidity and technical characteristics, and the recent shift by the Fed to focus on getting inflation down is beacon of what to come. The Fed will accelerate its tapering of bond purchases and move more quickly on interest rates which means that the discount rate will go up while growth might face headwinds from higher interest rates and a fiscal drag (the fiscal deficit will shrink in 2022). This is a double whammy for growth stocks.

DocuSign’s Q3 earnings release was portrayed as a problem of revenue growth but if you model the company’s shareholder value then you will see that the more sensitive parameter to its implied expectations is its future operating margin. While DocuSign lifted its operating margin to 3.1% for the quarter up from 0.5% in Q2 and -5.2% a year ago, it was still below expectations and that extends the trajectory for improving the operating margin and thus lowers the value of the company. Many growth companies will not have growth trajectories that will differ much from what is implied in current market values, and a downside miss is definitely not the biggest downside trigger on market value. The reality is that growth stocks are priced for high growth and then a hockey stick on operating margin, but if that hockey stick is pushed further out then it has a big impact on market value. The next year will separate growth stocks into two camp. Those that can deliver on expanding their operating margin and those that will fail to do that. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.