By Paul R. La Monica
The crypto crash isn't just hurting Bitcoin bulls. Investors in top brokerages like Robinhood, Coinbase, and Interactive Brokers, which have been some of the market's hottest stocks this year, are getting clobbered as well.
Bitcoin has fallen 24% since Oct. 6, taking other tokens with it. The question is whether what is happening in cryptocurrencies will lead to a broader stock market selloff? It doesn't seem to be happening now. While the major market indexes have been volatile, they aren't even close to being down 10% from a recent high, commonly defined as a correction,
The Nasdaq Composite has tumbled 4% from its intraday all-time highs, and the S&P 500 is still only about 2% below its recent peak. Both were rebounding Friday from earlier selloffs.
But the damage from the crypto crunch is clearly being felt by investors in the brokers. Robinhood is down about 4% in the past five trading days while Interactive Brokers and Coinbase have tumbled 5% and 7% respectively.
These slides are having an impact on the broader market as well. Robinhood, Coinbase and Interactive Brokers were all added to the S&P 500 this year and remain some of the best performers in the index. Robinhood has soared nearly 225% in 2025 while Interactive Brokers is up about 50%, which means they could have more room to fall.
Other brokerage stocks, such as Charles Schwab and eToro, have bucked the downward trend. Schwab is flat while eToro, which announced solid earnings and plans to enter the burgeoning predictions market earlier this week, has gained more than 15% in the past five days.
Nonetheless, the big pullbacks for most of the brokerage stocks could be a worrisome sign. Owen Lamont, a portfolio manager with Acadian Asset Management, told Barron's that the rise of stocks like Robinhood and Interactive Brokers so far this year reminds him of the froth in the market in the late 1990s.
Shares of companies like E*Trade and Ameritrade -- they are now owned by Morgan Stanley and Schwab, respectively -- soared along with dot-com stocks and then plunged along with the tech sector.
The top brokerages of today may be poised for further declines if the customers of these firms continue to sell crypto holdings and tech stocks tied to the artificial-intelligence trade, Lamont said. The fear is that in a prolonged bear market for these assets, trading volumes would dwindle, cutting into brokers' commission fees.
That isn't great news, but the current crypto and tech stock volatility may not necessarily lead to a selloff as dire as the one in 2000. Ron Albahary, chief investment officer with LNW, a wealth management firm, said the current market pullback in crypto and other so-called momentum investments is healthy.
Albahary said that he isn't seeing evidence of margin calls, when brokers demand more cash from investors who used borrowed money to buy assets, hitting the crypto or stock markets yet. Margin calls often lead to forced selling, which can cascade and lead to even bigger market pullbacks.
"Yes, there is a lot of leverage in crypto so that's partly why we're seeing this selloff. But it's not gotten to the point where there are red flashing signs yet about margin calls," he said. "That's always a risk but we're not seeing it as one that's imminent."
If nothing else, the volatility in crypto and tech should remind investors why a diversified portfolio makes more sense than one that is heavily levered to one or two themes.
Given how much the Magnificent Seven and the rest of tech dominate the S&P 500, it makes sense for investors to also have positions in equal-weighted market indexes like the Invesco S&P 500 Equal Weight ETF. Owning more defensively oriented sectors with high dividend yields, such as healthcare, real estate, and consumer staples, offers protection as well. Bonds also remain an important part of the asset allocation mix.
And gold, despite a recent pullback from all-time highs, has regained some of its luster lately. Gold prices are up more than 2% over the past five days while the price of Bitcoin is down 8%.
So much for cryptocurrencies being digital gold.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 14, 2025 15:05 ET (20:05 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
Comments