Crypto Stocks: Flow Data Indicates a Cycle Low

Crypto Sector Faces Steep Downturn

The cryptocurrency market is currently experiencing a significant downturn, with stocks tied to the sector having fallen by approximately 60% from their 2025 highs. This sharp decline has led to speculation that the market may be approaching a cyclical low, as current valuations are deeply discounted compared to previous peaks.

Coinbase serves as a prime example of this trend. Its share price stands at $159.94, a substantial drop from its 52-week high of $444.65, marking a 58.57% decrease over the last four months. This broad weakness across the industry is largely attributed to a mix of macroeconomic instability, global political tensions, and a generally pessimistic outlook within the crypto space.

Market activity remains muted, and although trading continues daily, a recent five-day decline of 20.28% highlights the severity of the current downtrend. These movements, influenced by external shocks and negative sentiment, have created what Bernstein describes as a "major discount" opportunity ahead of a potential earnings floor in the first quarter.

Short-Term Earnings Challenges vs. Long-Term Potential

In the near term, financial pressures are intense. Bernstein has revised its 2026 earnings per share forecast for Coinbase downward by 44% to $5.97, reflecting spot trading volumes that are about 30% lower than those seen in the fourth quarter of 2025. This earnings reduction is at the heart of the sector's current weakness, setting a clear bottom for the ongoing correction.

Despite these short-term headwinds, the outlook for long-term growth remains positive. Bernstein points to significant opportunities in multi-trillion dollar markets such as stablecoins, tokenization, and derivatives. For Coinbase, this involves expanding its derivatives operations and growing its stablecoin-related income. The company is expected to achieve a compound annual revenue growth rate of 26% through 2027.

The contrast within the sector is notable. While Coinbase is heavily influenced by fluctuations in cryptocurrency prices, other firms demonstrate greater resilience. Robinhood, for example, is projected to see its prediction markets revenue jump by 286% in 2026, providing a strong counterbalance. Figure Technology, which focuses exclusively on tokenization, has broadened its business and surpassed $1 billion in monthly loan originations as of March. These growth drivers are less dependent on crypto price cycles, supporting the argument that the current "major discount" is a temporary, cyclical event rather than a lasting decline.

Upcoming Catalysts and Potential Risks

The most significant short-term event is the upcoming first-quarter earnings season. Bernstein views the sector's current correction as setting the stage for a bottom ahead of these results, anticipating continued weakness through the quarter but seeing present valuations as an attractive entry point. The firm believes that Q1 earnings will establish a sentiment floor, with the possibility of recovery in the latter half of 2026 depending on improvements in underlying fundamentals.

The main threat to this outlook is the potential for ongoing negative sentiment in the crypto market and continued macroeconomic uncertainty. Bernstein attributes the sector's 60% decline to a mix of geopolitical instability and temporary weakness in crypto sentiment. Should these challenges persist beyond the first quarter, the period of low trading activity and subdued sentiment could be prolonged, delaying the expected rebound.

On the positive side, a strong performance by Bitcoin could serve as a catalyst. Bernstein maintains its stance that Bitcoin has likely reached its lowest point and is poised for further gains, with a year-end price target of $150,000. A sustained increase in Bitcoin's spot price would directly benefit the business performance of crypto-related stocks, reinforcing the cyclical bottom thesis and boosting overall market sentiment.