About: Investoom Weekly is the newsletter by the market intelligence company Investoom that provides AI-powered investment insights through social sentiment data, onchain data and financial data. Investoom democratizes the access to hedge fund insights.

Overview of the topics

• Stocks Highlights: First Republic Bank shares plummeted more than half of their value on Friday and reached an all-time low of $2.99.
• Social Data: During the past week, U.S. investors typed 250 times per day “First Republic”, associating the bank with negative sentiment.
• Financial Data: Wall Street is wrapping up a strong April with moderate gains as companies report strong profits.
• Onchain Data: Cryptocurrency adoption in the US has increased, with 22% of Americans owning at least one form of crypto in April.
• Deep Dive: Although BTC and ETH have both experienced downturns, they continue to be the most profitable cryptos in 2023.

‍

Stocks Highlights

First Republic Bank failed

It's a bloodbath in the stock market as First Republic Bank's shares take a nosedive, following reports that it's likely headed for receivership under the U.S. Federal Deposit Insurance Corporation (FDIC).

This devastating news comes on the heels of a 75% loss in its stock's value this week alone. If the San Francisco-based lender collapses, it would mark the third U.S. bank to do so since March. Moreover, First Republic recently reported that its deposits had fallen by over $100 billion in the first quarter, adding to the grim picture.

The bank's shares plummeted more than half of their value on Friday and reached an all-time low of $2.99, forcing trading to halt multiple times. At its lowest point, the bank's market cap was a mere $557 million, a net contrast to its peak valuation of over $40 billion in November 2021.

To make matters worse, short sellers have raised their bets against the bank by $63 million to $376 million in the past 30 days, according to the director of Predictive Analytics at S3 Ihor Dusaniwsky.

‍

Social Data

The past and future of First Republic

First Republic has a rich history dating back to 1985 when it was founded. The bank has since expanded its operations and now maintains offices in 11 states across the country, including California, Florida, and New York.

The bank's extensive network offers a wide range of financial services, including personal and business banking, real estate lending, and private wealth management services. In 2007, First Republic Bank was acquired by Merrill Lynch for a whopping $1.8 billion. Nevertheless, its journey did not end there since Merrill Lynch was subsequently acquired by Bank of America.

In 2010, Bank of America sold First Republic to a group of private investors. It was a turning point for the bank as it once again became publicly traded, paving the way for its eventual rise to become one of the most prominent financial institutions in the country.

However, the failure of Silicon Valley Bank and the subsequent collapse of Signature Bank in March sent shockwaves throughout the banking industry, triggering a run on deposits at regional banks like First Republic. As a result, both Fitch Ratings and S&P Global Ratings downgraded First Republic's credit rating, citing its high proportion of uninsured deposits and its lending practices, which saw it lend out more money than it had in deposits.

In need of capital to stave off further losses, First Republic sought loans from the Federal Reserve and the Federal Home Loan Bank, as well as a line of credit from JPMorgan. Furthermore, it even received a $30 billion infusion from 11 big U.S. banks, including JPMorgan Chase, Citigroup, and Wells Fargo, in an attempt to shore up its finances.

Despite these efforts, many of First Republic Bank’s clients have moved their money to larger banks, further compounding the bank's financial difficulties. Unfortunately, such as in the Silicon Valley Bank case, many of the deposits exceed the Federal Deposit Insurance Corp. (FDIC) limit of $250,000 per depositor, per FDIC-insured bank, or per ownership category, leaving them vulnerable to potential losses.

Indeed, during the past week, U.S. investors typed 250 times per day “First Republic”, and expressed a general negative sentiment towards the banking system.

‍

Financial Data

What about the broader financial market?

Wall Street is wrapping up a strong April with moderate gains as companies report better-than-expected profits for the start of the year. Despite some turbulence this week, the S&P 500 is set to close out its second consecutive winning month.

The Dow Jones Industrial Average rose by 193 points, while the Nasdaq composite was up 0.5%. Exxon Mobil and Mondelez International reported stronger profits and revenue than anticipated, lifting the market, while Intel reported a milder loss and stronger revenue than what expected. However, Amazon's 3.4% drop weighed heavily on the market despite stronger-than-expected profit and revenue for the latest quarter.

In general, the reporting season has been positive, with a lot of companies beating expectations, particularly tech giants Microsoft, Alphabet, and Meta Platforms. However, Wall Street is concerned about continued weakness leading to a third consecutive drop in earnings for S&P 500 companies in the second quarter.

Recent reports have increased expectations of the Federal Reserve raising interest rates at its next meeting, and traders are betting on the possibility of further rate increases in June. The Fed is concerned about high inflation becoming entrenched and slowing the economy. Indeed, they showed that worker compensation has risen more than expected, which could further contribute to inflation.

The Fed has already raised interest rates to their highest level since before the Great Recession, and it has caused cracks in the banking system. Last month, the second and third-largest U.S. bank failures in history rocked global markets, with investors now searching for other weak links.

‍

Onchain Data

Banking uncertainty makes cryptos rise

A recent poll by Morning Consult found that cryptocurrency adoption in the US has increased, with 22% of Americans owning at least one form of crypto in April, up by four percentage points from January.

BTC was the most widely held digital asset, with nearly 16% of respondents owning it, followed by Ethereum, Binance Coin, and Tether. This increase in crypto ownership may be due to fears of a banking crisis, as Silicon Valley Bank, Signature Bank, Credit Suisse, and First Republic have all experienced failures and decapitalization.

As a result, investors have sought out digital assets and gold producers, as well as shorting the US dollar. Despite this, gold still presents a relatively small fraction of the investable asset market, with the total amount invested in all financial assets being around $266 trillion, and gold bullion holding only about 1% of that amount.

‍

Community

Interested in what the other readers think about it? Join our community on Discord and discuss our insights with other investors! [Join Discord]

‍

Deep Dive

ETH vs BTC: what is the best crypto?

Although BTC and ETH have both experienced recent market downturns, they continue to be among the most profitable cryptocurrencies in 2023, with Bitcoin up 80% and Ethereum up 60% for the year.

Despite this, two market indicators suggest that Ethereum may actually be performing better than Bitcoin in the current market. These indicators paint a different picture of what is happening in the crypto space and highlight the potential value of investing in Ethereum.

Invite 3 friends to read the full article

‍

News of the week

• Banks: U.S. officials lead urgent rescue talks for First Republic Bank. [Read more]
• Technology: EU proposes new copyright rules for generative AI. [Read more]
• Markets: Dow gains more than 250 points Friday as the index finishes the best month since January. [Read more]
• Investments: China investment consensus cracks as politics fuel fears. [Read more]

Read the full version here.

About

Investoom is a Munich-based Fintech Startup democratizing the access to quantitative investment insights that are used by big hedge funds, but are inaccessible to retail investors. We are a market intelligence company that provides AI-powered investment insights through social sentiment data, onchain data and financial data.

Disclaimer: The Investoom newsletter is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions. [Read more].

Advertising and sponsorship do not influence editorial decisions or content. Third party advertisements and links to other sites where products or services are advertised are not endorsements or recommendations by Investoom. Investoom is not responsible for the content of the ads, promises made, or the quality or reliability of the products or services offered in any third party advertisement.