The fintech crash isn’t over…and that’s a good thing

 Julie VerHage-Greenberg photo
Julie VerHage-Greenberg Senior Manager of Content and Community, Orum
5min read

This is taken from our Unfiltered newsletter. Subscribe now for a no BS, uncensored analysis of fintech news and hot topics delivered to your inbox each fortnight.

I’m the Senior Manager of Content and Community at Orum, I was Bloomberg’s first fintech reporter and have been covering Robinhood from before it was a billion-dollar company. I’m not a Certified Financial Planner but that never stops people from talking about stocks, right? Just keep that in mind as I share my opinion in this Unfiltered.

Fintech stocks had an incredible run in 2020 and most of 2021. Affirm went from a $50 IPO to more than $150 at its peak. Shopify surged more than 300%. And Coinbase finished its first day of trading at $328 a share. You get the picture.

Then 2022 wiped all of that out. While the broader market is down around 15% since the start of the year, fintech stocks ranging from brokerages to crypto to embedded finance are down upwards of 70%. The fact that the party has stopped hasn’t taken anyone by surprise, but the veracity of it might have. So, WTF happened?

People have been worried about loads of macro-factors and stocks getting ahead of their earnings and growth projections for months now.

Growing concerns

Let’s be clear: the recent downturn is not nearly as surprising as Covid was. People have been worried about loads of macro-factors and stocks getting ahead of their earnings and growth projections for months now. We also have more data around how economies react to rising interest rates, overvalued assets, and rising inflation than we do to a once-in-a-century pandemic.

Case in point: I carried out a number of surveys last year of operators, investors and executives in fintech. Last summer in particular, people were extremely worried about things getting way ahead of themselves (pricing on what could be rather than what currently was) in the market. That fear applied to both public and private companies.

Amy Cheetham of Costanoa Ventures wrote last August that her biggest concern was around “Hype and too much capital in the system is creating an environment where companies raise too much money too quickly and lose sight of building a sustainable, capital efficient business. If the market dynamics change, there will be a lot of orphaned companies struggling to raise capital.”

I’d say that turned out to be pretty spot on.

There is a big chasm in some parts of the venture market between hype and substance. If and when things ever cool down, that chasm can become a huge abyss.

Mark Batsiyan of Inspired Capital

Dan Kahn of Plaid was worried about hype being far more prevalent than actual traction in business models, and Mark Batsiyan of Inspired Capital echoed similar sentiment: “There is a big chasm in some parts of the venture market between hype and substance. If and when things ever cool down, that chasm can become a huge abyss.”

Based on what’s happened with companies like Fast shutting down and others like Blend and Robinhood cutting ~10% of their staff, I’d say this prediction proved correct as well.

With that stage set, let’s take a look at why this is happening to begin with.

Carried away

The main thing I’d point out is that we all just got way ahead of ourselves. Affirm was never a $150 stock. But it also probably isn’t a $14 stock where it was at its low in the selloff. Same thing for companies like Robinhood, Coinbase, SoFi and others. Now, this doesn’t mean that the drop is over, but I also don’t think these companies have another 50% to fall.

This goes back to what a number of my friends said above. Hype was beyond reality, where investors and others were focused on the idea of what could be in a world where fintech was skyrocketing. The focus now is going to be on being more efficient with your capital spend and the ROI for areas that companies are still spending money on.

Where do we go from here?

Lots of things are changing now that Covid has less impact on consumer behavior. People aren’t shopping online as much, people aren’t trading stocks as much, interest rates are at all time lows, etc. But where do things level off?

There’s also a big question around consumer debt. Lots of the Covid programs that paused debt payments like student loans, rent and others are going away. That brings into question how healthy the consumer actually is.

I have no reason to give stock advice but I do get lots of notes from Wall Street analysts that do give stock advice, so let’s lean on them a bit to get a temperature check. The answer of where we go from here is a bit different for each area of fintech.


  • Tough times for crypto broadly, and Coinbase is one of the key stocks. Devin Ryan of JMP Securities recently wrote that he expects the next quarter to be even softer than the first few months of the year were. To be sure, he still has a price target of $250 on the stock, though that’s down from the $394 he had it at previously.

  • Dan Dolev of Mizuho is far more pessimistic. He lowered his estimates by over 80% and reduced his price target to $60 from $135 “to reflect worsening fundamentals and lower valuation/outlook for crypto-centric stocks.”

E-commerce and payments

  • Shopify is going to continue to be a tough call given the inflation environment and the future of online shopping and small businesses. Siti Panigrahi of Mizuho recently wrote that “while we believe in Shopify's long-term growth opportunity, we see the loss of Covid-related tailwinds, near-term macro headwinds, and e-commerce normalization putting pressure on top-line growth and SHOP shares in the near-term.”

  • Block (Square), is an interesting one. While Cash App seems to be crushing it, there are still lots of concerns about the business thanks to broader headwinds and the price of Bitcoin. In notes only about a week apart, Dolev raved about Cash App’s performance in the most recent quarter before saying he was disappointed that Square was getting put into the crypto stock bucket; “Tagging SQ as a 'crypto stock' has prevented the stock from benefiting from strengthening fundamentals, including accelerating GP dollars ex-Bitcoin across both Cash App and Seller ecosystems.”

  • Marqeta is down around 50% year to date, but analysts are still broadly optimistic. Dolev called Marqeta’s earnings “Solid and uneventful 1Q is refreshing in turbulent times,” adding that “We believe 1Q results and strong medium-term growth prospects certainly merit more investor love. Buy.”

Challenger banks

  • SoFi was down almost 20% and halted last week after accidentally releasing earnings early, but analysts seemed to be happy with what they saw. Dolev wrote “To say that the stock's -18% move (post release) is undeserved is an understatement.” He called out strength in personal loans and strong upside to revenue guidance as reasons for his bullishness.

  • Piper Sandler analyst Kevin Barker upgraded SoFi shortly after the earnings release, saying he believes the market is now "over-discounting" SoFi with the company poised to show a "significant ramp" in the second half of 2022 and into 2023.

My unfiltered opinion

Y'all, we knew things had gotten ahead of themselves. A reset was needed. I'd get ready for some more stabilizing, loads of consolidation, and another new normal for fintech as a whole. Companies, both private and public, that were too expensive to acquire before are now much more feasible. Startups at every stage are going to be focusing on what’s working and quickly cutting what’s not.

My hope is that through all of this, we find ourselves in a place of renewed focus on what’s truly making an impact, and one that’s sustainable.