🪙 Unstablecoins

…and the “buy now, pay later” boom turns into BNPN [Disclosures](   A stablecoin breaks the buck (dem10/Getty Images)   Yesterday’s Market Moves   Dow Jones 32,161 (-0.26%) S&P 500 4,001 (+0.25%) Nasdaq 11,738 (+0.98%) Bitcoin $30,712 (+2.11%) Dow Jones 32,161 (-0.26%) S&P 500 4,001 (+0.25%) Nasdaq 11,738 (+0.98%) Bitcoin $30,712 (+2.11%) Hey Snackers, The end of an MP3 era: [Apple]( has [discontinued]( its last iPod in production, the iPod touch. Apple says not to fret because the “spirit of iPod” continues in its other products. RIP-od, joining HitClips in music-player heaven. The market closed mixed after another roller-coaster day, swinging between green and red after Monday’s big sell-off. All eyes are on this morning’s inflation report for April, which [could]( — maaaybe — show price hikes finally starting to slow. Unstable A stablecoin just “unpegged” from the dollar, testing crypto’s ability to weather big downturns Not so stable after all… Stablecoins are causing crypto chaos. Refresher: stablecoins are cryptocurrencies whose value is (theoretically) pegged to another asset, like the USD. But this week TerraUSD (UST), the third-largest stablecoin, was unpegged from its $1 value and [fell]( to $0.62. Investors then sold UST (think: crypto bank run), sending jolts through the market. - Broken algorithm: Most stablecoins are backed by cash reserves, but “algorithmic” coins like UST are backed by “sister” coins. When one sister dips below $1, it can be swapped for the other at a small profit, which (theoretically) keeps both stable. - Bitcoin bailout: During this week’s bitcoin sell-off, UST and its sister coin slumped together, causing investors to ditch both. To prop ’em up, UST’s creator sold some bitcoin from a $3.5B emergency stash — but UST still isn’t back to $1. Crypto’s confidence crisis… goes beyond stablecoins. The crypto market has lost nearly $2T in capitalization from its November peak. Even [bitcoin]( is down 50% since then, which has led analysts to question its status as “reserve currency” for other coins like UST. - Companies including [Tesla]( [Square]( [Coinbase]( and [MicroStrategy]( have lost billions on crypto in recent months. - El Salvador, which accepts bitcoin as legal tender, has lost $$ too (though it bought 500 bitcoin this week). THE TAKEAWAY Most cryptos were minted in calm weather… Now they’re caught in the path of two storms: regulation and recession. UST’s “buck-breaking” moment showed that even so-called stable coins are risky, prompting Treasury Secretary Janet Yellen to call — again — for new crypto rules. Plus, economists predict a recession’s coming, which could cause un-tested coins like UST to lose more value. Investors may get caught in the rain: most short-term crypto investors are already underwater, and more than half of bitcoin holders are in the red. BNPN Upstart and Affirm shares plunge as the “buy now, pay later” boom fades — now, rising rates could boost “BNPN” Loanly, I'm Mr. Loanly... "Buy now, pay later" doesn’t sound as good as it used to. The days of near-zero interest rates and stimmy checks are gone, and it's [hurting]( loan providers — from BNPL firms like [Affirm]( to accessible lending platforms like [Upstart](. - Shares of Upstart tanked 56% yesterday, despite the company's better-than-expected [earnings]( (revenue more than doubled and profit 3X'd). - The AI-driven platform connects people with less-than-stellar credit scores to lenders with favorable terms. Its mantra: "you are more than your credit score." - Problem: Upstart cut its revenue forecast for the year and predicts lower sales and zero profit for this quarter. Pay in installments?... Maybe nah. Lending [boomed]( during the pandemic as extra-low interest rates made borrowing cheap — from home buying to online clothes shopping. BNPL firms like Afterpay, Klarna, and Affirm thrived by letting you buy those $700 Gucci loafers now and pay in installments later. Last year, Americans spent more than [$20B]( through BNPL. Almost a year ago, Klarna hit a $46B valuation, becoming the second-most-valuable private fintech. Now: - Interest rates are expected to keep rising as the Fed tightens its monetary belt to fight inflation. Cue: Affirm stock, down 81% this year. - Loan-default rates are rising after cruising at historic lows for the past year and a half. Lenders are demanding higher interest to make up for higher risk. THE TAKEAWAY When rates rise, BNPN wins… That’s “buy now, pay now.” Rising rates make loans more expensive — from credit-card debt to car leases — so consumers might start taking out fewer loans (hence: why Upstart slashed its forecast). Now the BNPL sector is being repriced to reflect that, and debt-laden Gen Zers are starting to [turn against]( the services whose growth they fueled. What else we're Snackin' - [Downhill]( [Peloton]( shares slid to a new low after the fitness-equipment maker said it took a $750M loan to help fund its turnaround, while burning $757M last quarter, compared to $9M a year earlier. - [Ta-dum]( [Netflix]( reportedly plans to launch an ad-supported tier by the end of the year — sooner than expected. The Flix is trying to entice new customers with a cheaper option, after losing 200K subs last quarter. - [Chat]( LGBTQ+ dating app Grindr is planning to go public via a SPAC, despite the broader IPO slowdown this year. The company said that it’s profitable, with 10M+ active users and a $2B valuation. - [Brrr]( [Coinbase]( shares plummeted 16% after the crypto exchange reported declines in revenue, trading volume, and users — all in a quarter that saw bitcoin and other digital assets hit with a new round of volatility. - [REIT-y]( Warehouse giant [Prologis]( offered to buy rival [Duke Realty]( for $24B. The potential megadeal shows the hot demand for industrial real estate as companies stock up on inventory to combat the supply-chain crisis. 🍪 Thanks for Snacking with us! Want to share the Snacks? Invite your friends to sign up [here](. Snack Fact Of the Day The T. Rex was alive closer in time to humans than to the stegosaurus [Read more]( Wednesday - April inflation data - Earnings expected from Toyota, Roblox, Occidental Petroleum, Disney, Rivian, Wendy’s, Bumble, Sonos, ZipRecruiter, Beyond Meat, and Krispy Kreme Authors of this Snacks own: bitcoin and shares of Apple, Tesla, Square, and Netflix ID: 2196229 Robinhood Snacks newsletters reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC (Member [SIPC]( and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are for informational purposes only, and are not a recommendation of an investment strategy or to buy or sell any security, digital asset (cryptocurrency, etc) in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. 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